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USAir maneuvers through more financial woes

The message on the USAir bulletin board was supposed to restore employee confidence:

"A number of employees have called Public and Community Relations over the past few days with the rumor that USAir is planning to file bankruptcy at the end of business today," said the message, which was posted in Tampa on Friday. "This is absolutely not true."

The message fueled more rumors. "It didn't say we were not filing bankruptcy at any time, it just said we weren't doing it Friday," said Dave Supplee, president of the Tampa local of the machinists union for USAir.

On Monday, USAir said it had no plans to file for bankruptcy protection but acknowledged that it expects a pretax loss of $200-million in the first quarter. USAir president Seth Schofield met throughout the day with labor union officials and asked them to consider new wage cuts and work-rule changes.

Also Monday, British Airways said it was delaying future investments in USAir until the U.S. carrier can reduce its costs. British Airways has already invested $400-million for a 24 percent stake in USAir.

"We consider that it would not be in our shareholders' interest to commit to investing the additional $450-million involved until the outcome of the restructuring (of USAir) is known," said British Airways spokesman Sandy Gardiner.

The two airlines "have been well aware that the times are changing," he said. "You need to restructure as an airline because of what's happening domestically."

The news sent USAir's stock down $1.25 per share to $9 on the New York Stock Exchange Monday. It was the eighth most actively traded issue on the NYSE, with 2,378,000 shares traded.

USAir is the dominant carrier in Tampa, with about 60 daily jet flights.

Monday's announcement from British Airways comes just 10 days before a deadline for U.S. Transportation Secretary Federico Pena to say whether he will approve an extension of "code-sharing" that allows USAir and British Airways to channel passengers to one another by using the same code in travel agents' computers.

The announcement raises the stakes for Pena by tying his decision to the health and possible survival of USAir. If he does not renew the code-sharing agreement, will it be a mortal blow against USAir?

The Arlington, Va.-based airline has been battered by invasions from low-cost airlines Southwest and Continental. Those carriers have invaded many USAir cities, increased service and slashed fares.

A year ago, USAir could charge about $200 for a one-way ticket from Tampa to Jacksonville. Since Continental started flying that route, the price has been slashed to about $50.

USAir has some of the highest costs in the industry. It costs USAir more than 10 cents to fly a single seat one mile, compared with about 7 cents for Southwest.

USAir got work-rule changes and wage cuts from its unions in the past two years, but many of those cuts have expired. The airline last month launched a program to improve efficiency by reducing the ground time of many flights. But it's too soon for that program to have much impact.

All major airlines except for Southwest have lost money during the past few years, largely because of the recession. But many carriers are bouncing back.

"Some of the airlines are showing a turnaround in profits. But USAir is not one of them," said Vincent Press, manager of information services for AVITAS, an airline consulting company in Reston, Va.

Airline analyst Michael Boyd said USAir needs to look further than the labor unions to return to profitability. The airline needs to trim its management to get rid of unnecessary costs.

"Those things take a very skillful knife to cut out," he said.

USAir spokeswoman Andrea Butler said Monday the airline had no need to file for bankruptcy protection because it has $850-million in cash or short-term investments. "Bankruptcy is not considered to be an option when you have that much liquidity," she said.

Schofield said Monday that weather was partly to blame for the first-quarter problems, but "the principal cause of our unacceptable loss is the requirement to sharply lower fares in response to the steady expansion of low-cost carriers into many of our East Coast markets."

_ Information from the Associated Press was used in this report.

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