UAL Net Dips; Delta, USAir Post Losses

UAL Corp. said Thursday that its earnings fell slightly in the third quarter, largely due to rapidly rising jet fuel prices and costs associated with a failed employee takeover effort.

Delta Air Lines Inc. and USAir Group Inc. posted quarterly losses.

The quarter is traditionally one of the strongest for the industry, which has been dogged this year by weak demand in an uncertain economy.

The parent company of United Airlines had a profit of $106.1 million, compared to $110.9 million in last year’s third quarter. Revenue rose to $2.97 billion from $2.58 billion.

UAL said the buyout effort, which was rejected Oct. 9 after a union-led group failed to get financing, cost the company $30 million, which was charged against third-quarter earnings. The fees included a $9-million payment to Gerald Greenwald, the ex-Chrysler vice chairman who led the failed buyout effort, and fees to the unions’ lawyers, bankers and public relations firm. A failed 1989 effort by management and pilots to take over the airline cost the company $76 million, which was charged earlier.

The fees have generated controversy among UAL shareholders, and are the subject of lawsuits against UAL in Chicago and Wilmington, Del. In an interview Thursday, assistant general counsel Kayla Gillan said the California Public Employees’ Retirement System was considering taking part in two suits that concern the latest buyout fees. The retirement system, one of the nation’s largest and most influential pension funds, already is a plaintiff in suits that involve fees associated with the first buyout attempt.

The suits contend that the fees should have been paid by the buyout groups, not the company, and that the payments are an improper use of corporate funds.

UAL’s third-quarter profit was also hurt by jet fuel costs, which rose to an average of 73 cents a gallon from 61.3 cents. “Moreover, we expect the average price to be significantly higher in the fourth quarter,” Chairman Stephen M. Wolf said in a statement.

Industry analysts said the company’s results were better than expected. “Compared to the group, the numbers were excellent,” said Edward Starkman, an analyst at Paine Webber.

UAL said its third-quarter earnings picture was brightened by a gain of $93 million from the sale of property, mainly aircraft. In last year’s third quarter, UAL posted similar gains of $45.8 million.

UAL said the number of miles flown by its paying passengers rose to 21.63 billion from 19.34 billion in last year’s third quarter. The airline’s load factor fell to 70.8% from 71.9%.

For the nine months that ended Sept. 30, UAL earned $218 million, compared to $317.4 million in the first nine months of 1989. Revenue rose to $8.23 billion from $7.43 billion.

Atlanta-based Delta said it lost $51.6 million, compared to net profit of $133.1 million in last year’s third quarter. Revenue for the quarter was virtually flat at $2.2 billion.

Delta’s passenger traffic was down during the quarter, with a passenger load factor of 61.3%, compared to 65.7% in the comparable quarter last year.

A Delta statement said the airline also faced increased competition from rival Eastern Air Lines Inc., whose operations were largely reduced by a strike in the year-earlier period.

Delta also announced that it will raise domestic fares by 5.8%, effective Wednesday, in response to fuel costs that have more than doubled since July 31.

Arlington, Va.-based USAir posted a loss of $120.3 million, compared to a loss of $77.7 million in last year’s third quarter. Revenue rose to $1.64 billion from $1.53 billion.

The company blamed high fuel costs for the poor performance and noted that passenger traffic increased more than 6% in the period.