updated 2/6/2004 10:37:34 AM ET 2004-02-06T15:37:34

US Airways Group Inc. cut its losses sharply in the fourth quarter, though the airline's top executive warned that the airline continues to lag behind its financial goals.

The Arlington-based company reported a loss of $98 million, or $1.82 per share, in the quarter ended Dec. 31, down from a loss of $794 million, or $11.67 per share, in the year-ago period.

The company's pretax loss for the fourth quarter of 2003 — excluding a $30 million gain from selling its investment in the Hotwire travel site — was $129 million. That compares to a year-ago pretax quarterly loss of $352 million, which excludes $565 million in bankruptcy-related items and aircraft impairment charges.

"Throughout the year, we made progress in reducing our losses, but regrettably, we are behind in our plan for achieving sustained profitability," Chief Executive Officer David N. Siegel said in a statement Friday.

Operating revenue rose 9 percent to $1.76 billion in the quarter from $1.61 billion in the year-earlier period.

Siegel said US Airways, which emerged from bankruptcy protection last March, continues to deal with cost and sales challenges confronting legacy airlines. Those airlines have struggled to cope with low-fare carriers and with continued weakness in high-yield business travel.

"Absent special items, none of these carriers reported a full-year profit, which highlights the fundamental change low-cost carriers are having on the industry overall," he said.

B. Ben Baldanza, the airline's senior vice president of marketing, said US Airways is having to adapt to customers whose expectations are changing more rapidly than anticipated. Their demands for lower fares are limiting revenue opportunities, Baldanza said.

"As fares continue to drop," he said, "it also becomes essential for us to lower our costs related to selling tickets."

Executives have said the airline, which has high operating costs, must make more cuts to succeed. US Airways has asked investment banking advisers, "in an exploratory process," to value its assets — and identify potential buyers. So far, no decision has been made to sell any assets, the company said.

For the full year, US Airways earned $1.46 billion, including $214 million in government compensation and $1.92 billion in income — such as a sizable net gain for discharging liabilities — recognized as a result of its Chapter 11 filing. That compares to a loss of $1.65 billion in 2002.

Operating revenue fell about 2 percent to $6.85 billion in 2003 from $6.98 billion in the prior year.

Both years' numbers include results while the airline was still under bankruptcy protection.

US Airways ended the fourth quarter with $1.84 billion in cash, including $1.29 billion in unrestricted cash, cash equivalents and short-term investments.

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