US Airways' year of flying profitably

Executives pointed to dramatic improvements in bag handling in Phila. A bid for Delta is still up in the air.

As US Airways anxiously awaits word if it can continue to pursue a bid for Delta Air Lines, company executives are celebrating one of the industry's strongest financial performances.

US Airways Group Inc. yesterday reported profit for the 2006 fourth quarter and full year and said that among the highlights of the final three months were "significant operational improvements" at Philadelphia International Airport.

The airline has struggled for more than two years to provide good baggage service at the airport, where it has its main international hub, carries more than 60 percent of the passengers, and has 5,700 employees.

Customer complaints at Philadelphia in the fourth quarter were down more than 30 percent, and reports of lost or delayed bags were down almost 15 percent, both compared with 2005, airline officials said in a conference call with analysts and reporters.

President Scott Kirby said that US Airways had 1,545 baggage handlers at the airport, about 350 more than this summer, but that it was continuing to hire to deal with normal workforce attrition.

During the quarter, Philadelphia's baggage handlers delivered 95 percent of inbound bags to carousels in an average of 19 minutes or less after flights arrived, which Kirby called "a monumental improvement over where we were just six months ago."

The airline has almost completed a $20 million effort to buy new baggage-handling equipment, repair broken items, and renovate departure lounges used by passengers, he said.

On its $9.9 billion bid for Delta Air Lines Inc., US Airways chairman and chief executive officer Doug Parker said his company was still waiting for a response to the offer from Delta's unsecured creditors. Parker said he had not asked his board for approval to raise the bid a second time. US Airways started the bidding Nov. 15 with a $9.4 billion offer.

US Airways said when it raised the offer Jan. 11 that it would expire tomorrow unless Delta's creditors supported the start of a process in which the would-be acquirer were allowed a closer look at Delta's books. The creditors also would need to support postponement of a Bankruptcy Court hearing on Delta's reorganization plan, scheduled for next Wednesday.

US Airways probably would not try to acquire Delta if it emerged from Chapter 11 as a stand-alone company, even though Delta's market value is likely to be less than the current offer, Parker said.

Acquiring Delta while it is in bankruptcy would give US Airways more flexibility in getting rid of airplanes that the combined companies would not need, Parker said.

On its financial results, US Airways said its fourth-quarter profit was $12 million, or 13 cents a share, on revenue of $2.8 billion. For the year, the company made $304 million, or $3.32 a share, on revenue of $11.6 billion.

The results will enable the airline to distribute $59 million in profit-sharing bonuses to its 35,000 employees in the first quarter, Parker said.

The fourth-quarter results are the first that can be directly compared with those of 2005 since US Airways and America West Holdings Corp. merged on Sept. 27, 2005. For accounting purposes, the full-year results have to be compared with those of America West, which was treated as the acquiring company. In the 2005 fourth quarter, US Airways lost $261 million, or $3.27 a share, on $2.6 billion in revenue.

Parker said he expected 2007 would be even more profitable for an airline that was in bankruptcy and faced liquidation two years ago.

"Few people would have believed, at the time of our merger," he said, "that the new US Airways would be the most profitable network airline in 2006."

Shares of US Airways closed at $53.10, down $1.33.


For US Airways' fourth-quarter and year-end financial report, go to http://go.philly.com/USAIR4Q


Contact staff writer Tom Belden at 215-854-2454 or tbelden@phillynews.com.