- The Washington Times - Sunday, May 4, 2003

CHICAGO (AP) — United Airlines’ parent company incurred an industry-worst $1.34 billion loss in the first quarter — its second-largest deficit ever — and said the weak economy and SARS are hindering its recovery effort in bankruptcy.
  Both the company and airline analysts said heavy cost-cutting and the end of war in Iraq should generate a big improvement in the current quarter, although a financial recovery still hinges on an end to sinking revenue and an industrywide slump.
  UAL Corp. cited a number of factors yesterday as contributing to its 11th straight quarterly loss, including the soft economy, war, SARS, the necessity of low fares and consumer fears — ill-founded, it insists — that it might go under.
  Chief Executive Officer Glenn Tilton called the January-through-March quarter “particularly difficult.” He said booking trends have since improved and labor expenses are sharply lower under new contracts that took effect Thursday, slashing costs that have been the industry’s highest.
  “While much work needs to be done, United has made substantial progress putting its house in order.”
  The rocky results pushed the total of first-quarter losses for major U.S. airlines to $3.56 billion, on pace to exceed the industry’s deficit in the previous quarter. US Airways reports its numbers Tuesday.
  Airline stocks still soared yesterday, with several recording double-digit gains, after Merrill Lynch said in a note to investors that the worst might be over for the struggling industry.
  Standard & Poor’s analyst Philip Baggaley said it remains a “distinct possibility” that United could fail to meet coming financial benchmark requirements of its bankruptcy lenders, who then could move to cut off its financing.
  However, he noted: “United’s success in implementing labor-cost savings and signs of recovery in revenues from the effect of the Iraq war should help the airline’s case in seeking waivers, should those become necessary.”
  The net loss for the first quarter amounted to $14.16 per share, compared with a loss of $510 million ($9.22 a share) a year ago.
  Excluding $385 million in reorganization items and other special charges, the loss was $10.11 a share.
  Revenue was $3.18 billion, down 3 percent from $3.29 billion a year earlier. Passenger revenue was down 8 percent.
  While United said U.S. and trans-Atlantic bookings are improving, bookings in the Pacific remain weak because of SARS. Another revenue decline appears likely in the second quarter.
  The company lost $2 million a day from operations in the first quarter — a substantial improvement from the second half of last year. Jet-fuel costs were 46 percent higher than a year earlier.
  United said the new labor contracts and reduced flight schedule will trim salaried and related costs by $400 million to $500 million for the current quarter, and it expects significant savings from renegotiated or abandoned aircraft leases.
  With $956 million in unrestricted cash and its labor contracts now settled through 2008, industry experts say United’s chances of liquidation have diminished.
  Dan Kasper, an airline consultant for LECG in Cambridge, Mass., called the latest results “modestly encouraging.”
  “United has taken a very, very big step in getting its costs problem under control,” he said. “Now they need a big uptick on revenue.”
  United’s loss was exceeded only by its record $1.5 billion loss in the fourth quarter, when it sought Chapter 11 bankruptcy protection.
  UAL shares, which were delisted from the New York Stock Exchange April 3, rose 8 cents to $1.27 on the OTC Bulletin Board.

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