UAL’s Net Loss Deepens to $1.3 Billion

UAL Corp., the parent of United Airlines, on Friday reported the biggest quarterly shortfall of any major U.S. air carrier as the war in Iraq discouraged travel and raised fuel costs.

The $1.3-billion net loss topped that of rival AMR Corp., parent of American Airlines, which posted a $1-billion first-quarter loss last week and narrowly averted a bankruptcy filing for the third time after winning wage concessions from labor.

UAL, which filed for the largest bankruptcy protection in U.S. airline history in December, also sought court approval Friday to shut its maintenance facility in Oakland that employs 900 and another facility in Indianapolis.

The nation’s second-largest airline said its loss was $14.16 a share, compared with a loss of $510 million, or $9.22 a share, a year earlier. Revenue fell 3.2% to $3.18 billion in the quarter from $3.29 billion a year earlier.

“The first quarter was particularly difficult, given travelers’ concerns about the conflict in Iraq, the weak economy and a fierce low-fare environment, as well as speculation about our company’s future -- speculation that is now abating,” Chief Executive Glenn Tilton said.

Others agreed with Tilton’s assessment that although the first-quarter numbers were pretty bleak, fears of outright liquidation are lessening.

“UAL posted an unexpectedly weak” first quarter, “but there are definite signs of light at the end of the tunnel,” Lehman Bros. analyst Gary Chase said.

Chase cited big labor concession packages just approved by a Bankruptcy Court, forthcoming government aid and falling fuel prices as factors that now tip the scales in favor of an eventual successful exit from bankruptcy protection.

United said it ended the first quarter with $1.6 billion in cash, of which $644 million was restricted for payment of certain obligations. Its cash burn rate from operations was about $2 million daily during the first quarter.

UAL said both domestic and transatlantic bookings have improved. But the company’s Pacific operations, which account for a big chunk of revenue, have been suffering because of severe acute respiratory syndrome, or SARS. The airline has pulled back flights to the region.

United, based in Elk Grove Village, Ill., said it expects capacity for the rest of the year to be lower than previously announced but did not give a figure. It said capacity would be down 14% for April and 20% for May. Capacity is measured by available seat miles, or the number of seats available on airplanes times the number of miles flown.

In a move critical to emerging from Chapter 11 protection, United secured court approval Wednesday for labor cost cuts of $2.56 billion a year over the next six years.

UAL’s loss included $248 million for the restructuring and an additional $137 million in write-downs for UAL’s investment in and guarantee of debt for Air Canada.

Excluding those items, the loss totaled $958 million, or $10.11 a share, United said. Analysts expected United to report a loss of $12.08 a share excluding those items, according to Thomson First Call.

UAL shares rose 8 cents to $1.27 in over-the-counter trading.