US Airways’ net income dips on higher taxes

Posted Wednesday, Oct. 23, 2013  comments  Print Reprints
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Higher income taxes pushed US Airways’ third-quarter profit down even as the carrier had more planes filled with passengers paying higher fares.

The Tempe, Ariz., carrier, which wants to merge with Fort Worth-based American Airlines, posted a $216 million profit, a decrease of 11.9 percent from the same quarter last year. Revenue, however, grew 9.1 percent to a record $3.9 billion.

US Airways increased capacity by 4.1 percent in the quarter as it replaces smaller, older planes with slightly larger aircraft. Passengers also spent more per flying mile, up 4.4 percent, and the carrier said its planes carried more people as its load factor grew 0.6 percentage point to 85.5 percent. Unit revenue also grew 4.9 percent for the quarter.

Executives at the airline defended its solid financial results, saying profitability should not keep it from merging with American. The Justice Department filed an antitrust suit to stop the deal in August, saying it is anti-competitive and will hurt consumers. The two sides are scheduled to go to trial Nov. 25.

“Strong companies merge all the time, and the point of this merger is we will be stronger, we will be able to attract more customers, we will be able to offer more benefits to customers if we are allowed to merge. The fact that we are currently making profits today doesn’t change that in any way whatsoever,” US Airways President Scott Kirby said.

Noting that US Airways has improved its credit rating but is still below investment grade, US Airways chief executive Doug Parker said, “What we’re really talking about here is merging a single-B credit with a bankrupt credit.” American’s parent company has been in bankruptcy since November 2011.

US Airways paid $120 million in income taxes in the quarter, compared with only $1 million in the third quarter of 2012. The significant increase comes as the company had no losses to carry over from previous years. The carrier ended the quarter with $3.55 billion in cash and investments, not including $350 million in restricted cash.

Excluding one-time accounting items, the carrier said it would have earned $367 million, or $1.16 per share — better than Wall Street estimates of $1.12, according to Thomson Financial. Shares of US Airways (ticker: LCC) declined 55 cents to close at $21.40.

Separately, seven mayors from the hub cities served by American and US Airways have written a letter to Attorney General Eric Holder asking the Justice Department to settle the antitrust suit.

The letter, signed by Fort Worth Mayor Betsy Price and Dallas Mayor Mike Rawlings, reiterated the mayors’ support for the merger and emphasized that a stronger airline network would help the cities and the airline employees who live there.

“Our cities rely on the airline industry to support existing businesses, attract new businesses and to keep our local economies moving forward. The health and well-being of our cities and our citizens depends on this combination moving forward,” the mayors wrote.

Also, Oklahoma Attorney General Scott Pruitt said he intends to file an amicus brief in November with the federal court to support the merger. Pruitt, who is not among the state attorneys general who joined the Justice Department in the antitrust complaint, said his filing will argue that the merger violates neither state nor federal antitrust laws.

“The Department of Justice should drop its lawsuit and allow the merger of American Airlines and US Airways to continue,” Pruitt said. American employs more than 6,000 workers at its maintenance base in Tulsa.

Andrea Ahles, 817-390-7631 Twitter: @Sky_Talk

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