updated 7/29/2005 11:18:52 AM ET 2005-07-29T15:18:52

Bankrupt US Airways Group Inc. reported Friday that its second quarter losses increased from a year ago by 82 percent, to $62 million, as bankruptcy-related items and higher fuel prices wiped away the airline’s savings in labor costs.

The airline said it hopes to receive bankruptcy court approval in September for its planned merger with America West Airlines, which was announced in May. The Justice Department and Air Transportation Stabilization Board — a unit of the Treasury Department — have already approved the deal.

The loss of $62 million, or $1.13 a share, includes $26 million in bankruptcy-related costs. Excluding those items, the company lost $36 million, compared to $34 million in the year-ago quarter.

The losses were not nearly as bad as predicted by three Wall Street analysts surveyed by Thomson Financial, who estimated a quarterly loss of $2.28 a share.

The $26 million in bankruptcy costs includes $19 million paid during the quarter in professional fees to the lawyers and consultants who have guided the company through the Chapter 11 process.

Quarterly revenue was essentially static, from $1.96 billion in the year-ago quarter to $1.95 billion.

The airline said it paid an average of $1.68 per gallon for fuel in the second quarter, a 57 percent increase from a year ago. As a result, the airline spent 69 percent more on fuel, from $263 million in the year-ago quarter to $445 million.

The fuel hikes alone nearly obliterated the huge savings in personnel costs resulting from big pay and benefit cuts that were negotiated with the airline’s labor unions after US Airways filed for bankruptcy in September.

Quarterly personnel costs dropped 36 percent, from $627 million to $402 million, meaning the airline spent more money on fuel in the second quarter of 2005 than it did on paying its workers.

“Record fuel prices continue to offset the tremendous progress we have made in reducing costs,” said US Airways chief executive Bruce Lakefield.

The company reported that its mainline revenue per available seat mile, an industry measure of how much cash an airline brings in for each customer it flies, dropped 5 percent in the quarter from 11.52 cents a year ago to 10.97 cents. Mainline cost per available seat mile also dropped 5 percent, from 11.18 cents to 10.59 cents. Excluding fuel, costs dropped 17 percent, from 9.40 cents to 7.83 cents.

For the year, the airline has lost $343 million, or $6.26 a share, on revenue of $3.57 billion. In the first six months of 2004, it lost $143 million, or $2.63 a share, on revenue of $3.66 billion.

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