1 The airline industry's fortunes, in dazzling shape for most of the year, have taken a sudden turn for the worse in the past few weeks.
2 Citing rising fuel costs, promotional fare cuts and a general slowdown in travel, several major carriers have posted or are expected to post relatively poor third-quarter results.
3 Yesterday, USAir Group Inc., recently one of the industry's stellar performers, posted a worse-than-expected $77.7 million net loss for the period.
4 So far, the industry's fourth quarter isn't looking too strong either, prompting many analysts to slash earning projections for the rest of the year by as much as one-fourth.
5 And they say the outlook for 1990 is nearly as bad.
6 Airlines in 1989 'came in like a bang and are going out like a whimper,' said Kevin Murphy, an airline analyst at Morgan Stanley & Co.
7 This turn of events has put a big damper on an industry that seemed almost invincible last spring, when fares were rising at double-digit rates and many carriers seemed to be growing fat on near-monopolies in certain markets.
8 Now, many airline companies might become a lot less attractive as takeover targets on Wall Street.
9 The downturn also raises questions about the carriers' ambitious orders for new airplanes, which currently total $32.5 billion over the next three years.
10 For travelers, though, the industry's problems have had some positive effects.
11 In recent weeks, airlines have cut numerous fares in leisure markets to try to win back customers.
12 Others have tried to spruce up frequent-flier programs.
13 Previously, airlines were limiting the programs because they were becoming too expensive.
14 Just last week, for example, Trans World Airlines and Pan Am Corp. 's Pan American World Airways went so far as to offer cash rebates or gift checks of $200 to $1,000 to certain frequent-flier members making trans-Atlantic flights in business class or first class.
15 The industry's slowdown became apparent this month when AMR Corp., parent of American Airlines, reported an 8.8% drop in third-quarter net income and said its fourth quarter would be 'disappointing.' Shortly before that, USAir had said its third-quarter results would be 'significantly lower' than a year earlier.
16 Yesterday, it provided the details: Its loss of $77.7 million, or $1.86 a share, contrasted with net of $68.5 million, or $1.58 a share, in the 1988 third quarter.
17 Revenue rose only 3.3% in the latest period, to $1.53 billion from $1.48 billion.
18 For the nine months, the Arlington, Va., company's net plunged 73% to $38.5 million, or 76 cents a share, from $142.2 million, or $3.28 a share.
19 Revenue rose 12% to $4.75 billion from $4.22 billion.
20 The results surprised many analysts, because USAir has almost no competition in its Pittsburgh hub and has expanded operations by completing its acquisition of Piedmont Airlines.
21 Shortly after announcing its quarterly loss, USAir's stock tumbled $3 a share.
22 It ended at $40.125, down $2.375, in New York Stock Exchange composite trading.
23 'Nobody was expecting this size of a loss,' said Paul Karos, an analyst with First Boston Corp.
24 One airline executive, who declined to be identified, called the loss 'amazing.'
25 In announcing the results, USAir cited many of the same problems that several other industry officials have named recently.
26 It said the industry's domestic traffic was flat in the third quarter; analysts say this was because hefty fare increases earlier in the year scared off many leisure travelers this summer.
27 To try to combat the traffic slowdown, airlines started reducing fares; average fares rose only 1.7% in August, in contrast to increases of 16% each in February and March.
28 But so far, the effort has failed, and traffic is still slow.
29 Some other fare promotions have backfired.
30 This summer, the industry introduced a 'kids fly free' program, in which children were allowed to fly free if they were traveling with an adult.
31 Airlines tried to restrict the program substantially by limiting the offer to certain days of the week, but it still was apparently used far more heavily than the airlines expected.
32 Airlines also say their frequent-flier programs are squeezing profits because awards are being redeemed at a heavier-than-normal rate.
33 One airline official said about three times as many free-travel coupons are being turned in as in previous years -- not surprisingly, as the airlines last year allowed many travelers to build up mileage at triple the normal rate.
34 Rising operating expenses are another problem.
35 Fuel costs were up 10% in the third quarter.
36 Labor costs, which leveled off in the past few years because of lower pay scales for newer employees, are on the upswing again at many carriers.
37 And some carriers are facing other unexpected headaches: USAir, for example, blamed some of its loss on merger expenses and on disruptions caused by Hurricane Hugo last month. 'We cannot quantify the total adverse effects of Hugo,' said Edwin Colodny, chairman and president of USAir Group.
38 Whatever the cause for the downturn, few people are predicting any sudden improvement.
39 Airline Economics Inc., an aviation consulting firm, is projecting an industrywide operating profit of $2.5 billion for 1989, compared with earlier forecasts of $3 billion to $3.5 billion.
40 As for 1990, the firm predicts that profit will slip to between $1 billion and $1.5 billion.

Citing rising fuel costs , promotional fare cuts and a general slowdown in travel , several major carriers have posted or are expected to post relatively poor third - quarter results .
poor third - quarter results
How do these results differ from first-quarter results?