Loss Widens at UAL on Costs
United Airlines parent UAL Corp. said Thursday that its second-quarter net loss widened to $1.43 billion because of costs for the company’s reorganization.
The loss was $12.33 a share, compared with $247 million, or $2.25, a year earlier, the Chicago-based carrier said. Its only larger quarterly net loss was $1.47 billion in the last three months of 2002, when UAL filed for bankruptcy protection. Sales rose 5.6% to $4.42 billion.
UAL said it had $1.39 billion in reorganization costs, including noncash expenses related to scrapping pension plans and rejecting airplanes and contracts. The company plans to file a reorganization plan with the U.S. Bankruptcy Court by Tuesday. United is the world’s second-largest airline.
“They are making progress,” said Ray Neidl, an analyst at New York-based Calyon Securities. Costs, excluding a surge in fuel expenses, were on track to return UAL to profitability, he said.
The company said its operating profit for the quarter rose to $48 million from $7 million a year earlier, even as it paid $262 million more for fuel. Labor costs fell 13% to $1.5 billion, helped by two rounds of pay and benefit concessions that have provided annual savings of $3.3 billion.
Excluding the reorganization costs and other one-time items, the second-quarter loss would have been $26 million, or 26 cents a share, UAL said. On that basis, the company was expected to have a loss of $1.18 a share, the average estimate of three analysts surveyed by Thomson Financial.
UAL shares rose 5 cents to $1.45.
The company in July finished union approval of the second round of worker concessions, helping trim annual costs by $700 million. UAL has said it needs the savings to compete against expanding discount carriers and adjust to higher fuel prices.
UAL Chief Executive Glenn Tilton told workers in a taped message Thursday that the operating earnings showed the “underlying strength of our business.”
United also expects $645 million in annual savings from terminating its employees’ defined-benefit pension plans, which pay fixed amounts after retirement, and replacing them with defined-contribution plans that are funded before retirement.
All of United’s unions, except the flight attendants, have reached agreement with the company on eliminating the pensions.
The attendants’ union has threatened to strike over the issue and said Thursday that workers would protest at 20 locations around the world. United reiterated in a statement that a strike would be illegal.
