US AIRWAYS Airline CEO anticipates no profit until 2007

The company hasn't ruled out any options for raising revenues and cutting costs.
ALEXANDRIA, VA. (AP) -- US Airways does not expect to turn a profit until 2007, even if it achieves all the steep pay cuts from its workers that it is seeking through the bankruptcy process, the company's former chief financial officer testified Thursday.
The bleak financial outlook, even assuming the airline is permitted to terminate its remaining pension plans and impose pay cuts of up to 30 percent in some cases, illustrates the difficulty the airline faces in attracting a new investor to provide the cash US Airways would need to emerge from bankruptcy.
Doubtful on investors
Dave Davis, who until last month was US Airways' CFO, said it's doubtful the company can attract a new investor even if a bankruptcy judge grants the airline's request to cancel its collective bargaining agreements with its unions, and imposes new terms that would save the airline $1 billion a year.
"It's going to be very challenging to attract equity with the returns projected in [the airline's most recent transformation plan]," Davis said. "It sort of gives the company a fighting chance, but it's not really something you could go the market with" and attract new investment.
Chris Chiames, the airline's senior vice president for corporate affairs, agreed with Davis' assessment. He said the company is still looking for ways to either decrease costs or improve its revenue outlook.
He ruled no options out, but said the most likely source would be to try to find better ways for the airline to utilize its fleet of 280 jets, rather than seek deeper cuts from labor.
"This is a dynamic process and we still have more work to do," Chiames said.
US Airways, bankrupt for the second time in two years, is seeking to transform itself into a low-cost carrier in the mold of America West or JetBlue. The airline says it needs to drastically cut worker pay, change work rules, terminate its remaining pension plans and eliminate most medical benefits for retirees to become competitive with such airlines.
It is asking a judge to cancel the labor contracts of unions that do not agree to new deals and has warned that it will have to begin liquidating assets by mid-January if it does not receive the requested relief.
In court Thursday, Davis said the airline estimates that it will still lose $200 million in 2005 and $25 million in 2006, even if it receives all of its requested cuts. A small profit of $35 million is projected in 2007, with higher profits in 2008 and beyond.
Merely estimates
It should be noted that those projections are merely estimates. In the company's first bankruptcy, it underestimated its fuel by about $200 million a year and underestimated its revenue by about $860 million a year.
Once the company does turn a profit, the employees who are taking such severe pay cuts now would be eligible for profit sharing that Davis said is the best in the industry.
Employees would get 10 percent of all profits on a profit margin of up to 5 percent, and 25 percent of all profits on a margin greater than 5 percent.
But Davis said the airline's best projected profit margin in its transformation plan is slightly higher than 3 percent, well below the average for those airlines that actually turn a profit.