Kevin O'Toole/LONDON

NET PROFITS for the major US airlines topped $1 billion in the third quarter after a clutch of record-breaking performances.

Although passenger and capacity figures remained virtually unchanged, yields rose by 5.5% across the industry, with none of the carriers posting a decline. USAir and Continental Airways, having ended their cutthroat low-fares battle on the East Coast, both managed to show a double-digit rise of around 12%.

Action on costs also showed through, although a little more unevenly. Overall, seat costs were kept to a modest rise of only 1.5%. There are grimmer warnings for the fourth quarter, however, following the imposition of the fuel tax, which started on 1 October.

The industry is fighting through the US Congress for a further two-year stay of execution, but the tax will still be collected as the debate goes on.

Trans World Airways (TWA), fresh from its refinancing and a self-imposed spell under Chapter 11 bankruptcy protection, was alone among the majors in posting a loss for the quarter.

The airline points out that the headline loss only comes after writing off nearly $300 million in restructuring charges, including the setting up its employee ownership scheme.

The charges were partially offset by the write-off of $141 million in debt from the refinancing, but still turned a strong operating profit into a net loss. Without the charges, TWA says that it would have turned in a profit of $77 million for the quarter.

"We believe that we are stronger than we've been in nearly a decade," says TWA president Jeffrey Erickson. He adds that the company's cash position is also more comfortable in the wake of the restructuring. Free cash has more than doubled to $251 million.

Elsewhere within the industry, the worst of the restructuring now appears to be over, leaving the airlines to take advantage of a steady recovery in the market.

United Airlines, a year on from its dramatic employee ownership deal, led the pack with a net profit of $243 million, helped by a "robust" rise in yields, which chairman Gerald Greenwald says has carried through into October.

Besides the obvious impact on wage costs, Greenwald adds that after a year of employee ownership, grievances are down by 75%, and even sick days have fallen by one quarter, which helps to contribute $32 million.

United, still faces negotiations with its flight attendants scheduled to begin, at the turn of the year ready for a new contract in March 1996. "We would like to have them as owners, but we're prepared to negotiate a new contract," says Greenwald.

Delta Airlines also faces further tough negotiations with its pilots as the carrier attempts to grind costs down. Another fall in the third quarter took seat cost down to ¢5.2 per revenue passenger kilometre (RPK). The next objective is to go below ¢5 by mid-1996 and to reach the final target of ¢4.7 per RPK (or ¢7.5 per passenger mile) a year later.

Southwest Airlines still keeps the lead on unit costs, and chairman Herb Kelleher says that they remained "below expectations" in the third quarter despite a fractional rise. Kelleher warns of a likely further rise in costs in the fourth quarter, with sluggish traffic and the impact of the fuel tax, but pledges further reductions in unit costs for 1996.

Southwest has ambitious growth plans for 1996, with the arrival of the its latest Boeing 737s.

Source: Flight International