United Airlines Parent Loses $537 Million, Cuts 1,100 Jobs

CHICAGO — United Airlines parent UAL Corp. lost about a third of its market value Tuesday after reporting a $537 million first-quarter loss due to soaring fuel costs and saying it is cutting flights and 1,100 jobs.

The sell-off accelerated and shares of other airlines dropped after Delta Air Lines Inc. CEO Richard Anderson said in Washington that in the face of record fuel prices domestic carriers would need to raise fares by 15 percent to 20 percent just to break even. At the same time, crude oil prices jumped by more than $2 and neared the once-unimaginable $120-a-barrel mark.

Anderson said higher fares would likely diminish demand for air travel, and prompt carriers to further reduce their schedules.

UAL's loss, in what it called an "extraordinarily difficult" environment for airlines, was the biggest since the nation's second-largest carrier emerged from bankruptcy in 2006 and worse than Wall Street expected. Shares in the company plummeted more than 35 percent to close at $13.55 Tuesday, after setting a new low of $12.78.

Chicago-based UAL said its nearly 8 percent growth in revenue from the first quarter of 2007 was more than offset by a $618 million jump in fuel costs, which rose nearly 50 percent in a year.

The carrier follows American Airlines parent AMR Corp. and Continental Airlines Inc. into the red for the quarter because of fuel costs. Southwest Airlines Co. is the only large carrier to have reported a profit so far. Delta and Northwest report first-quarter results on Wednesday, while US Airways Group Inc. reports Thursday.

Among smaller carriers, JetBlue Airways Corp. reported an $8 million loss Tuesday that was narrower than expected, as slower growth helped the discount airline keep a lid on its costs despite skyrocketing fuel prices.

High oil prices and the global credit squeeze are also affecting demand for new planes. While airlines can still negotiate substantial discounts, European planemaker Airbus said Tuesday that the ever-weaker dollar and high metals prices are forcing it to raise prices. Airbus announced increases of as much as 3 percent to catalog prices _ on top of the 2.74 percent annual hike for 2007 already programmed.

UAL said it will lower its planned 2008 spending by $400 million and eliminate 500 salaried and management jobs and 600 union jobs by the end of the year. UAL also said it will cut capacity 9 percent by the fourth quarter, on top of a 5 percent reduction in the fourth quarter of 2007, and take 10 to 15 more narrow-body aircraft out of its operating fleet for a total of 30 to be grounded.

"Although both our revenue performance and our non-fuel cost performance were good this quarter, they were not enough to offset the significant and rapid rise in fuel prices," CEO Glenn Tilton said in a message to employees.

"The path to sustainable profitability requires us to fundamentally overhaul every facet of our business," Tilton said.

Combining with another carrier could be next, especially in the wake of the proposed tie-up this month of Delta and Northwest Airlines Corp. While Tilton did not specifically address talks with Continental, he did say that consolidation is "one of the changes required to address the gap between where we stand today and profitability and sustainability."

UAL's net loss for the January-through-March quarter amounted to $4.45 per share, compared with a loss a year earlier of $152 million, or $1.32 per share. Revenue was $4.71 billion, up from $4.37 billion. Analysts were expecting $4.75 billion.

The breathtaking extent of the stock drop raised questions about UAL's financial health. But Chief Financial Officer Jake Brace told analysts on a conference call that the company has no problems in meeting its debt obligations, and it still has $2.9 billion in cash.

Standard & Poor's revised its outlook on UAL's debt last week to negative from stable. S&P airline analyst Philip Baggaley said he anticipates potential difficulties in the company making its required $928 million in 2008 debt and capital lease payments because of the weak economy and high fuel prices.

"Currently they don't have a problem, but given the earnings outlook they could well have one later this year," he said Tuesday.

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AP Business Writers Dan Caterinicchia in Washington, D.C., and Emma Vandore in Paris contributed to this report.

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On the Net:

http://www.united.com

Comments

[FreedomCorpse]

American worker jobs get outsourced to cheap labor markets, wages stagnant or declining since turn of the century, financial markets teetering on bankruptcy, foreclosures hitting records, endless mindless war, bush administration bankrupts nation with help of bill clinton policies, UAL loses a bunch of money, 4 other airlines already went bankrupt, and the worst bad news hasn't arrived yet about almost everything regarding the economy.

[swift_goat_pet_for_truth]

Airlines take losses.
Cut Jobs.
People without jobs fly less.
Airlines has less customers.

Airlines take losses.
Cut jobs.

etc. etc. etc.

[mmckinl]

Peak Oil will cull the airlines mercilessly. Some of the "Old Hands" in the airline industry , who hailed deregulation, are now calling for reregulation! This will be of little comfort as jet fuel gets ever more expensive.

[dukeitout]

Is it not apparant that UAL and most of the other airlines (an exception is Southwest) are once again looking for yet another excuse to justify their inability to make a profit? A "duh" outcome will be more massive infusions of government money to bail them out one way or another. I doubt if mergers will help reduce their predictable bankruptcy declarations every 4-5 years. They should ask Herb Kelleher of Southwest to explain why, after spending 10 cents to run your business, you must assure 11 cents in income to assure continuity of the business. If they can't consistently make a profit, the airlines should be regulated and subsidized in a more apparant way by "Uncle."

[studlyguy]

This is just the beginning,oil skyrocketing can only mean the death nail for more airlines is coming,it's not only going to be the rest of us normal Americans going down ,the airlines won't be able to stay afloat with these skyrocketing oil prices,and the airlines that survive will have to charge up the a*s so only the very well to do will be able to fly,cause it will be way to expensive for majority of Americans.

[ibsteve2u]

lollll...yet more Americans sacrificed in the temple of the American Petroleum Institute and the Amex symbol XOI to feed the eternal greed of the few...