UAL posts loss of US$2.7 billion; 7,000 jobs to go

UAL Corporation, the holding company whose primary subsidiary is United Airlines, has posted a net loss of US$2.7 billion, or $151 million if excluding certain non-cash accounting charges, for the second quarter ended June 30.

UAL said the massive second quarter loss was coupled with a $773 million increase in consolidated fuel expense.

As a result, United will retire a total of 100 aircraft and reduce fourth-quarter mainline domestic capacity by 15.5 per cent to 16.5 per cent year on year. In conjunction with the capacity reductions, the company said it expects to reduce its workforce by approximately 7,000 by the end of 2009 in a bid to stay afloat in this competitive, high-cost environment.

United said in a release it will also form a partnership with Continental Airlines that aims to create "the most comprehensive domestic system by linking networks as well as creating potential for cost savings and operational efficiencies, while simultaneously benefiting customers."

Glenn Tilton, United's president, chairman and CEO, said: "The elimination of our entire B737 fleet and our alliance with Continental are examples of the different approaches we are taking to respond to dramatically changed market conditions to deliver better results for all our stakeholders."

During the second quarter, UAL said in a statement it recorded $2.6 billion of previously announced accounting charges, including a $2.3 billion non-cash special charge for goodwill impairment.

Mainline cost per available seat mile (CASM), excluding fuel and the above-mentioned accounting charges, was up 2.6 per cent during the reporting period compared to the second quarter of 2007.

Mainline CASM for the quarter was up 85.5 per cent year on year, reflecting a 55.4 per cent increase in mainline fuel price per gallon and the significant accounting charges.

On the other hand, the company said it strengthened its cash position by raising $90 million through new financings, asset sales and freeing up $130 million in restricted cash. In addition, the company expects to raise $330 million in cash in the third quarter through aircraft financings and the release of restricted cash, resulting in an anticipated total cash balance improvement of approximately $550 million.

The statement added that "The company may record additional accounting charges in future quarters related to its capacity reductions, including possible non-cash fleet and property and equipment impairment charges, further intangible asset impairment charges, expenses to terminate early certain facility and aircraft leases and additional severance costs.

"However, at this time, the company is unable to reasonably estimate the amount and timing of these future charges," it said.

Excluding the accounting charges, in the second quarter of 2008 the company said it generated an operating loss of $87 million, versus operating income of $537 million in the year ago period, primarily as a result of the significant increase in fuel expense.