US Airways looks to continued strength in Q3

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US Airways anticipates strong financial performance in the third quarter, coming off record earnings during quarter ending in June.

Capacity will increase by about 3.5% compared to the same period a year earlier, according to the Tempe, Arizona-based carrier's latest investor update, while Scott Kirby, president of US Airways, says unit revenues are expected to increase by about 2% to 4% in each month during the quarter, based on forward bookings for July.

"Stronger consumer confidence, business confidence and macroeconomic performance seem to be combining to drive the improved revenue environment," he says during an earnings call on 24 July. "Business demand strength, in particular, is continuing into the third quarter."

This comes after US Airways reported an 18.9% increase in operating profit to $481 million on $3.87 billion in operating revenues and $3.38 billion in operating expenses in the second quarter. Net profit was $287 million after $37 million in special charges.

Passenger revenue per available seat mile (PRASM) fell 0.9% to 14.5 cents, largely due to slack demand at the beginning of the quarter that is partially attributable to US federal government budget cuts known as the sequester.

"We had a magnified effect in March, April, May because businesses beyond government employees also pulled back at the same time," says Kirby on the impact of the sequester. "They've gradually gotten back on the road, but we still are suffering a full point of RASM [revenue per available seat mile] just from government travel."

Government related revenues remain down about 37% compared to last year, he adds.

Mainline costs per available seat mile (CASM) excluding fuel, profit sharing and special items are anticipated to decline 3% to 5% during the third quarter, according to the update. This will contribute to a 1% decrease to a 1% increase for the full year.

Operating CASM excluding fuel, profit sharing and special items was down 0.4% year-on-year to 9.15 cents in the second quarter. CASM overall was down 2.4% to 14.2 cents.

All of the positive guidance aside, the closing of US Airways proposed merger with American Airlines will be the big story of the third quarter. The deal is expected to close by the end of September, subject to government approval.

"It's very rewarding for our last earnings report as an independent company to be the best in our history," says Doug Parker, chairman and chief executive of US Airways, during the call. "It validates the work that our team has done and gives us all great confidence as we head into our merger with American Airlines."