United Airlines parent loses $537 million, cuts 1,100 jobs

CHICAGO – United Airlines parent UAL Corp. lost more than a third of its market value today after reporting a $537 million first-quarter loss due to soaring fuel costs and saying it is cutting flights and 1,100 jobs.

The loss, in what UAL called an “extraordinarily difficult” environment for airlines, was the biggest since the nation’s second-largest carrier emerged from bankruptcy in 2006 and worse than Wall Street expected. Shares in the company plummeted 34% to $14.06 in morning trading.

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

The Chicago-based company 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% by the fourth quarter, on top of a 5% 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 Tilton said in a message to employees.

UAL Corp. follows American Airlines parent AMR Corp. and Continental Airlines Inc. into the red for the quarter because of fuel costs. Southwest Airlines Co. is the only large carrier to have reported a profit so far. Delta and Northwest report first-quarter results on Wednesday, while US Airways Group Inc. reports Thursday.

Among smaller carriers, JetBlue Airways Corp. reported an $8 million loss Tuesday that was narrower than expected, as slower growth helped the discount airline keep a lid on its costs despite skyrocketing fuel prices. Oil rose to all-time highs above $118 a barrel on Tuesday on concerns about supplies.

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

Combining with another carrier could be next, especially in the wake of the proposed tie-up this month of Delta Air Lines Inc. and Northwest Airlines Corp. While 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.”

UAL’s net loss for the January-through-March quarter amounted to $4.45 per share, compared with a loss a year earlier of $152 million, or $1.32 per share.

Revenue was $4.71 billion, up from $4.37 billion. Analysts were expecting $4.75 billion.