MINNEAPOLIS -- US Airways Group said on Thursday it lost $541 million in the fourth quarter on a mix of sour fuel hedges and operating losses.
"Clearly, from a financial perspective we're happy to put 2008 behind us," Chairman and Chief Executive Doug Parker said on a conference call. "Due primarily to extraordinarily high fuel costs it was an extremely difficult year for the airline industry and US Airways."
He predicted that falling fuel prices and investments to improve service will help US Airways perform better in 2009 than other U.S. hub-and-spoke carriers.
However, the company did not predict a full-year profit, saying it's too hard to tell what travel demand will be in the recession.
The nation's fifth-largest carrier said business demand was weak in the fourth quarter. Meanwhile, leisure demand is strong, President Scott Kirby said, but aggressive fare sales in January have reduced margins on those tickets.
The Tempe, Ariz.-based airline said it lost $4.74 per share, compared with a loss of $79 million, or 87 cents per share, during the same period in 2007. Revenue was $2.76 billion, down 0.6 percent from almost $2.78 billion during the fourth quarter of 2007.
Not counting special items such as $234 million in paper losses on fuel hedges, US Airways said it would have lost $1.93 per share.
Analysts surveyed by Thomson Reuters, who generally exclude one-time charges, expected a loss of $2.15 per share on revenue of $2.78 billion.
The oil price run-up that peaked in July prompted many airlines to lock in fuel prices to hedge against further increases. Instead, oil prices fell. That limited the benefit of lower fuel prices. US Airways said fourth-quarter jet fuel prices fell by 10.1 percent compared to a year ago, not counting hedges. Counting hedges, fuel prices rose 33.8 percent.
Airlines cut capacity last year, first because of fuel prices, and later because demand fell as the economy slowed. US Airways said traffic fell by 3.8 percent during the quarter, but it cut capacity faster -- by 5.9 percent.
The airline ended the year with $1.05 billion in cash and marketable securities, plus another $187 million in other securities. Another $700 million in cash was restricted, including money pledged in various hedging transactions.
By JPMorgan analyst Jamie Baker's measure, US Airways cash was flat from the third quarter, at $1.3 billion, even though it raised some $800 million in cash in October. The apparent cash burn suggests that in 2008 the airline "was on the verge of bank debt covenant violations and potential bankruptcy," he wrote in a note to investors. Things are much better now that the airline's revenue and fuel price situation have improved, he wrote.
Lending covenants require the company to keep at least $850 million in unrestricted cash. Parker said the company can raise more money if the need arises, but at this time no such moves are expected. He declined to specify what cash-raising options he believes are available.
Fuel drove its cost per available seat mile up 21.5 percent to 14.62 cents. It would have risen 5 percent even without fuel price movement and hedging.
The company plans to have a fleet of 350 mainline planes by the end this year, down by four. It's getting rid of 29 planes, mostly Boeing 737s and 757s, and adding 25 new planes, mostly Airbus A320s and A321s.
Parker started out the conference call by saying how proud he was of the crew of the flight that crash-landed in the Hudson River without any fatalities.
"Over the last couple of weeks what we've been particularly pleased about is how this event has helped the flying public to better appreciate and value pilots, flight attendants, mechanics -- frankly all airline employees, and the important work that we do. And that's just been extremely nice to see," he said.
For the full year, US Airways said it lost $2.21 billion, or $22.06 per share, compared to a 2007 profit of $427 million, or $4.52 per share. Revenue rose 3.6 percent to $12.12 billion, from $11.7 billion in 2007.
US Airways shares fell 91 cents, or 12.5 percent, to $6.39 in afternoon trading.