US Airways sees unit revenue declines in Q2

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US Airways anticipates that unit revenues will decline in the second quarter, as government and business travel demand slows.

Revenue per available seat miles (RASM) is expected to fall by 2% to 4% in April, and be flat to down 2% in May and June, says Scott Kirby, president of US Airways, during an earnings call on 23 April.

"Business demand remains volatile, however, and as long as the sequester stays in place, I expect that government-related demand will continue to be depressed," he says, adding that government-related revenue was down 37% in March compared to a year earlier.

RASM was up 2.2% to 15.78 cents in the first quarter compared to a year earlier.

Capacity will continue to grow despite the sluggish demand. Available seat miles (ASM) are expected to be up 3.5% this year due to upgauging to 183-seat Airbus A321s from 144-seat Boeing 737-400s and increases in long-haul flying, according to an investor update on 23 April. The airline previously anticipated a 3% increase in capacity this year.

Domestic capacity will grow by 3.4% and international capacity by 3.8% versus 2012, says US Airways chief financial officer Derek Kerr, during the call.

The growth comes even as US Airways opts to removes three 204-seat Boeing 767-200ERs instead of three 150-seat Airbus A320s this year, according to an updated fleet plan. It still plans to remove 18 737-400s and take delivery of 16 A321s and five Airbus A330-200s.

Mainline costs per available seat miles (CASM) excluding fuel, special items and profit sharing will be down 1% to up 1% for the year, says Kerr. The metric is expected to be flat to up 2% in the second and third quarters compared to the same periods a year earlier, and down 3% to down 5% in the fourth quarter.

Mainline CASM excluding fuel, special items and profit sharing was up 0.7% to 8.77 cents during the first quarter.

US Airways anticipates that it will pay an average of $2.95 to $3 per gallon for fuel this year, says Kerr. It expects to pay an average of $2.89 to $2.91 per gallon in the second quarter.

The carrier paid $3.24 per gallon in the first quarter, down 0.9% year-on-year.