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USAir warns about profit
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June 8, 1999: 12:32 p.m. ET
Earnings shortfall blamed on lower- than-expected traffic, rising labor costs
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NEW YORK (CNNfn) - Less than 24 hours after striking a new union contract agreement with its 7,000 mechanics, US Airways issued a second-quarter profit warning Tuesday, citing unexpectedly low May traffic and rising labor costs.
The Arlington, Va.-based airline said it now expects second-quarter earnings to be between $1.80 and $1.85 per diluted share before non-recurring items, well below the $2.15 per share Wall Street had been expecting.
In a filing with the Securities and Exchange Commission Tuesday, US Airways (U) blamed softer-than-anticipated May traffic and higher-than-expected expenses driven by resolving several open labor contracts sooner than expected for the profit decline.
A US Airways spokesman said the tentative contract reached with the International Association of Machinists and Aerospace Workers (IAM) was not solely to blame for the re-adjusted profit outlook, but did contribute.
The nation's sixth-largest airline is now expecting its available airline seat capacity to grow at only 5.9 percent in fiscal 1999, down from its original forecast of 7 percent. That figure includes only 4.5 percent growth during May.
The announcement follows on the heels of a similar profit warning from UAL Corp., the parent company of United Airlines, the world's largest airline.
UAL (UAL) said Tuesday its second-quarter earnings would fall 30 cents to 70 cents a share short of predictions, prompting the company to cut its summer fares by 25 percent to help rejuvenate passenger traffic. That prompted other airlines - including Delta Air Lines Inc. (DAL), Continental Airlines Inc. (CAIB) -- to make similar reductions Tuesday morning
By midday, US Airways had lowered its summer fares by a "comparable" amount as well.
On Monday, US Airways announced it had reached a tentative new contract agreement with the IAM covering its 7,000 aircraft mechanics and related employees. Terms of the deal were not disclosed.
The company also noted that the fleet service employees at US Airways, who are represented by the same union, had ratified a union contract with the airline April 1.
US Airways shares were down 2-3/8 to 49-3/16 in midday trading. 
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US Airways
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