Can USAir survive? On Apr. 13, the airline's auditor, KPMG Peat Marwick, released a report on 1994's results that questioned the carrier's financial viability. Six days later, though, USAir announced a narrower-than-expected first-quarter loss of $96.9 million and a surprising profit of $42.2 million for March. What's more, the carrier recently has wrested concessions from its pilots and is negotiating givebacks with other unions. On Apr. 19, BUSINESS WEEK's Christina Del Valle interviewed CEO Seth E. Schofield about USAir's prospects.
Q: What has changed since the auditors' report was written? And how likely is a Chapter 11 bankruptcy filing?
A: There is no anticipation of a bankruptcy filing. At the end of the first quarter, we had unrestricted cash in excess of $400 million. And we've indicated that at yearend, we would expect to get at least that much in cash, barring unforeseen circumstances....For the auditors to be comfortable, we would have to have all of the labor deals completed and approved, and that was not possible.
Q: Is the $400 million enough to give the company the cushion it needs to carry it into the summer?
A: Yes, based on forecasts that we are looking at for the balance of the year--barring unforeseen circumstances. If you look at first-quarter results, you can see a significant improvement. And if you focus on March,
the beginning of the strength of the season, I think it bodes well.
Q: The pilots' concessions represent 40% of USAir's $2.5 billion savings goal. Will the other unions provide the rest?
A: A lot of time has been spent on the allocation among employee groups. Nearly 40% from the pilots is what the labor participants feel is fair. So the answer is yes.
Q: How will you compensate for a rise in fuel costs?
A: We have a higher fuel number in the budget for the balance of the year than what we experienced in January. Our employee productivity for March on a year-over-year basis was up 10.1%, which is very significant. We have 1,700 fewer employees than we had a year ago. Before yearend, I expect to reduce staffing by between 1,200 and 1,500 employees.
Q: British Airways PLC has been patient with its [$300 million] investment [in USAir]. Will it invest more?
A: In the short term, we do not have a need for new capital. After we take delivery of eight 757s this year, we will not have any new deliveries of aircraft in '96 or '97. With respect to BA, our relationship is stronger today than on the day we signed the agreement. BA has seen either cost reductions or revenue enhancements in the $100 million range. When USAir returns to profitability, they intend to invest more money.
Q: Will USAir continue to be a national carrier?
A: We want to be the prominent airline from the East Coast to any place in the world. We can do that ourselves or through our alliance with British Airways. We're not trying to be a niche carrier.