UAL Reports Record Loss of $1.77 Billion

Burdened by the heavy costs of reworking its airplane leases and contracts, United Airlines’ parent company reported a record $1.77-billion loss for the third quarter Monday to run its overall losses from nearly three years in bankruptcy protection to $9 billion.

UAL Corp. said the $1.8 billion in reorganization costs, driven by $1.7 billion in noncash aircraft rejection charges, were normal for a company nearing the end of a bankruptcy overhaul and pointed to a $165-million operating profit as evidence its restructuring was paying off.

“We have largely completed United’s restructuring work and we are on schedule to emerge from Chapter 11 in early February as we have announced,” Chief Executive Glenn Tilton told employees in a recorded message.

Even so, it was the company’s 21st consecutive quarter in the red and the loss topped its previous record deficit of $1.47 billion for the fourth quarter of 2002, when it filed for bankruptcy.

The Elk Grove Village, Ill.-based company said the aircraft restructuring charges consisted of creditors’ claims on its planes after it rejected scores of leases and contracts to secure lower prices. It said the claims were still formally in the process of being settled for a fraction of those amounts.

Once those claims and others are accounted for, the company expects to report a large on-paper gain offsetting them when it exits bankruptcy. Chief Financial Officer Jake Brace said the gain could total $10 billion.

“This is very normal for bankruptcies ... [and] has nothing to do with the operation of the business at all,” Brace said. “The industry still has a number of challenges, fuel costs chief among them, but we’re pleased with our results.”

Despite the continuing losses, analysts say the nation’s No. 2 airline has largely accomplished what it needed to do in bankruptcy.

“They are seeing positive signs from the changes they’ve made in the last two years,” said George Novak, an airline consultant at Metis Group in Washington. “Along with the rest of the industry, it doesn’t mean they’re out of the woods yet. But they’ve laid the groundwork for success.”

Novak said United’s biggest remaining challenge would be to “get the word out that United is strong and healthy and ... there should be no hesitancy in making bookings on United.”

The company’s net loss for the July-through-September period amounted to $15.26 a share, compared with a loss of $274 million, or $2.38, a year earlier.

Operating revenue rose 8.1% to $4.7 billion from $4.3 billion.

Excluding the total of $1.8 billion in restructuring costs for the period, UAL said it would have had a profit of $68 million. Operating earnings were $245 million better than the result from the third quarter of 2004. The company said it spent $405 million more on fuel in the fall quarter than a year earlier.