UAL’s Profit Down 40%; Takeover Activity Cited

UAL Corp., the parent of United Airlines, said Thursday that third-quarter earnings fell nearly 40% because of costs related to recent takeover activity.

The Chicago-based company said the decline in earnings to $111 million was also due to higher gasoline costs and commissions to travel agents. Revenue in the third quarter rose 7% to $2.6 billion. UAL said takeover activity doubled its share price and increased the value of stock options, resulting in a non-cash expense of $35.5 million. UAL said that expense would be reversed in the fourth quarter because the company’s stock price has dropped significantly in the wake of the failed $300-a-share takeover bid two weeks ago.

The company’s shares closed Thursday at $170.75, up $9.75 on speculation that the company’s union groups might put together a recapitalization proposal.

Advisers to United’s pilots and flight attendants met in New York Thursday to review their options.

Patricia Friend, president of United’s flight attendants, said it was uncertain whether any proposal would result from the talks. She said the flight attendants and the pilots were still interested in a transaction that would give them ownership in the airline.

Meanwhile, an executive of the International Assn. of Machinists said he met with the union’s advisers Thursday to explore options for United’s future, possibly including employee ownership. John Peterpaul, vice president of the IAM, said that he expected to meet with the union’s advisers through the weekend. He said the union, which isn’t working with the pilots, might have a proposal as early as next week, but he could not predict what form it would take.

Peterpaul said he remained opposed to employee control of the airline because there is a natural conflict between the interests of workers and management.