- The Washington Times - Wednesday, April 23, 2008

CHICAGO (AP) — United Airlines parent UAL Corp. lost more than a third of its market value yesterday after reporting a $537 million first-quarter loss because of soaring fuel costs.

The airline said it is cutting flights and 1,100 jobs.

The sell-off accelerated and shares of other airlines dropped after Delta Air Lines Inc. Chief Executive Officer Richard H. Anderson said in Washington that in the face of record fuel prices, domestic carriers will have to raise fares by 15 percent to 20 percent just to break even. At the same time, crude oil prices jumped by more than $2 and neared the once-unimaginable $120-a-barrel mark.

Mr. Anderson said higher fares likely will diminish demand for air travel and prompt carriers to further reduce their schedules.

UAL’s loss was the biggest since the nation’s second-largest carrier emerged from bankruptcy in 2006 and worse than Wall Street expected. Shares of the company plummeted $7.88, or 37 percent, to close at $13.55 on the Nasdaq Stock Market. The slide erased almost $938 million of UAL’s market value.

Chicago-based UAL said its nearly 8 percent revenue growth from the first quarter of 2007 was more than offset by a $618 million jump in fuel costs, which rose nearly 50 percent in a year.

UAL follows American Airlines parent AMR Corp. and Continental Airlines Inc. into the red in the latest quarter. Southwest Airlines Co. is the only large carrier to have reported a profit so far. Delta and Northwest report first-quarter results today, while US Airways Group Inc. reports tomorrow.

UAL said it will lower its planned 2008 spending by $400 million and eliminate 500 salaried and management jobs and 600 union jobs by the end of the year. UAL also said it will cut capacity 9 percent by the fourth quarter, atop a 5 percent reduction in the fourth quarter of 2007, and take 10 to 15 more narrow-body aircraft out of its operating fleet for a total of 30 to be grounded.

“Although both our revenue performance and our non-fuel cost performance were good this quarter, they were not enough to offset the significant and rapid rise in fuel prices,” CEO Glenn F. Tilton said in a message to employees.

“The path to sustainable profitability requires us to fundamentally overhaul every facet of our business,” Mr. Tilton said.

Combining with another carrier could be next, especially in the wake of the proposed tie-up this month of Delta and Northwest Airlines Corp. Although Mr. Tilton did not specifically address talks with Continental, he did say that consolidation is “one of the changes required to address the gap between where we stand today and profitability and sustainability.”


Shares of UAL Corp. plunged 37 percent yesterday after the United Airlines parent reported its worst loss since emerging from bankruptcy in 2006.

Q1 ‘07 —$152 million

Q2 ‘07 274

Q3 ‘07 334

Q4 ‘07 —53

Q1 ‘08 —537 million

Source: Bloomberg News

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