=20 ---------------------------------------------------------------------- This article was sent to you by someone who found it on SFGate. The original article can be found on SFGate.com here: http://www.sfgate.com/cgi-bin/article.cgi?file=3D/n/a/2007/07/26/financial/= f100947D18.DTL --------------------------------------------------------------------- Thursday, July 26, 2007 (AP) Airlines Struggle to Contain Costs By CHRIS KAHN, AP Business Writer (07-26) 17:17 PDT PHOENIX (AP) -- U.S. airline stocks dropped Thursday as carriers continued to struggle with high fuel prices and maintenance, though AirTran Holdings Inc. increased second-quarter profits by cutting costs in other areas. Tempe-based US Airways Group Inc. said its second-quarter earnings fell = 14 percent, in part because of fuel costs. Chairman and Chief Executive Doug Parker said the carrier also has invested heavily this quarter in improving its operations in response to low customer service ratings and a computer glitch that shut down hundreds of self service kiosks in March. "By no means have we declared victory, but we're flying as good an airli= ne as anyone else right now," Parker said in a conference call. US Airways shares fell 27 cents to $34.57 Thursday. Among other U.S. carriers posting results Thursday, Midwest Air Group In= c. said its second-quarter earnings fell 45 percent, to $4.9 million. Alaska Air Group Inc. said its income slid 17 percent to $46.1 million in the second quarter. Frontier Airlines Holdings Inc. posted a net loss of $3.5 million in its fiscal first quarter, compared with net income of $4 million a year ago. AirTran Holdings Inc., which is trying to buy Midwest, said profits jump= ed 30 percent to $41.5 million as it saw non-fuel unit costs drop for the fourth straight quarter. Like AirTran, most airlines have tried to boost profits by scraping away at their non-fuel costs. But this is getting harder to do, said Ray Neidl, an analyst at Calyon Securities. "It's killing them," Neidl said of fuel prices. "It's amazing that they'= re making money where fuel right now is about $77 per barrel." Air carriers have previously offset high fuel costs by raising ticket prices. But Neidl said they've been unable to do that because of competition. "There are all kinds of junk fares in the market, particularly in Southwest (Airline's) market," US Airways President Scott Kirby said. "What happens is Southwest puts a Ding! fare on the market. One airline finds it, matches it, everyone else matches that airline. Southwest pulls the Ding! fare 24 hours later, but nobody can track it very effectively, then it winds up staying in the market." Kirby was referring to alerts that Southwest sends to consumers via computer about deeply discounted flights. Despite the slide in profits, US Airways results topped Wall Street's expectations and the carrier began recalling 225 furloughed flight attendants and 130 furloughed pilots. Quarterly earnings for US Airways dropped to $263 million, or $2.77 per share, from $305 million, or $3.25 per share, in the prior-year period. Excluding special items, the airline earned $2.74 per share in the recent quarter. Wall Street, on average, expected quarterly earnings of $2.64 per share, according to a Thomson Financial analyst survey. Revenue slipped to $3.16 billion from $3.17 billion on weaker revenue from its cargo and express units, but matched analysts' expectations. Parker said US Airways' profits were tempered this quarter as it worked = to improve its operations following a computer glitch in March that temporarily shut down check-in kiosks around the country. He said US Airways non-fuel costs were up about 5 percent as it replaced 600 of the malfunctioning kiosks and hired 1,000 additional airport personnel to support operations nationwide. Unit passenger revenue — a key industry gauge of revenue divided by capacity — across US Airways' mainline and express fleets grew by 0.2 percent, while mainline unit costs rose by 2.6 percent. Among US Airways' increased costs, aircraft maintenance expenses rose to $170 million from $153 million due to the return of leased aircraft and other items. The carrier continues to integrate operations following America West Airline's acquisition of the former US Airways in 2005. The airline still has not reached a contract agreement with its major employee unions, including its pilots, flight attendants, baggage handlers and maintenance. But US Airways said it has reached a single labor transition agreement during the past three months with its flight crew training instructors and flight simulator engineers represented by the Transport Workers Union. The carrier also expects to have a single operating certificate by September. Alaska Air Group shares fell $2.78, or 10 percent, to $24.31. Midwest Air Group shares dropped 91 cents, or 6.6 percent, to $12.99, Frontier shares fell 18 cents, or 3 percent, to $5.81, and AirTran Holdings fell 25 cents to $9.94. ___ Associated Press Writer Travis Reed contributed to this report. --------= -------------------------------------------------------------- Copyright 2007 AP <<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> If you wish to unsubscribe from the AIRLINE List, please send an E-mail to: "listserv@xxxxxxxxxxxxxxxxx". Within the body of the text, only write the following:"SIGNOFF AIRLINE".