US Airways Reports Q1 Profit

US Airways seems well on its way to fulfilling a promise made by CEO Doug Parker earlier this year, that his airline would be profitable for 2006. After a loss last quarter of $261 million, US Airways Group -- formed by the merger of US Airways and America West last September -- rebounded for the first quarter of 2006 with a profit of $5 million.

That's not a lot by ExxonMobil standards... but it is a big chunk of change for domestic airlines right now, and it certainly beats the $16 million loss posted by stand-alone carrier America West for the same period in 2005.

Fare increases and capacity reductions -- leading to fuller planes, with passengers paying more per seat -- are credited with the reversal in fortunes for US Airways, as are cost reductions associated with the merger.

The reported profit excludes so-called "special items", which represent both money makers and losers for the carrier.

For example, the reports don't take into account a $90 million gain that came after Airbus forgave a company loan (associated with the carrier's agreement to purchase 20 A350s). A $26 million unrealized gain related to the airline's fuel hedges is also not included in the tally -- because the carrier says those gains were offset by $46 million in merger-related expenses, and another $11 million spent paying down existing debt.

Even taking into account rising fuel prices -- US Airways expects average fuel prices between $2.16 and $2.21 per gallon for the full year -- Parker said Tuesday US Airways should continue to, believe it or not, make money.

"Looking forward, we anticipate a very strong spring and summer and now expect to be profitable for the full year 2006, even after accounting for merger-related expenses and with continued high fuel costs," Parker said.

One analyst agreed... while also given credit to those now managing the merged airline.

"There is a strong macro trend in RASM (revenue per available seat mile) and yield increases for the industry as domestic capacity is being cut back," said Calyon Securities analyst Ray Neidl in a research note. "However, the old America West management that is now running the combined companies is doing a commendable job in controlling costs but, even more importantly, raising yields in the old US Airways system."

FMI: www.usairways.com