CHICAGO >> United Airlines met its lenders' financial benchmark for the first three months of its bankruptcy but acknowledged today that the war in Iraq poses a severe threat to its reorganization.
United losses mountAmerican Air talks snag
but airline still meets
By Dave Carpenter
The carrier also put its net loss for January and February at a combined $749 million, putting it on a pace for its third billion-dollar quarterly loss in the last year and a half.
United, which lost a company record $3.2 billion last year, is required under the terms of its debtor-in-possession financing to show swift progress toward profitability this year or risk having its loans cut off.
It said it had met its lenders' first critical requirement -- that it show a loss of no more than $964 million between Dec. 1 and Feb. 28 in earnings before interest, taxes, depreciation, amortization and aircraft rent. It declined to disclose its specific loss for that period.
The world's second-largest airline reported a $307 million operating loss and a $367 million net loss in February -- on top of a $382.1 million net loss announced earlier for January -- and ended the month with a cash balance of about $1.5 billion.
But its prospects for a successful reorganization have been seriously clouded by the Iraqi conflict and accompanying slump in air travel. While working to secure a proposed $2.56 billion in annual labor cuts, it also is lobbying for federal aid for the beleaguered airline industry.
"Our results for the past three months show that United has made good progress in restructuring its operations and finances," chief financial officer Jake Brace said.
"However, the war in Iraq presents a number of serious challenges that are already affecting the industry and that are expected to negatively impact earnings and cash flow for United and its competitors. We are moving rapidly to address those challenges," he said.
The company reiterated that it may have to impose additional wage cuts beyond the temporary reductions made in January if its situation doesn't improve soon.
United, which operates 1,700 daily flights, said last week it was reducing its flying schedule by another 8 percent starting in April.
It notified its unions last that 2,300 flight attendants and 1,100 Indianapolis-based mechanics would be put on temporary leave.
Hints of progress are also emerging from United's labor talks as it continues to negotiate ahead of its May 1 deadline for voiding contracts in bankruptcy court if no agreements are reached.
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Negotiations between American Airlines and its pilots have become entangled over the financially troubled carrier's intention to fire nearly 1,000 additional pilots, a union official said today.
American Airlines talks snag
In a statement, the airline said the jobs "were over and above what we needed to operate the airline in January 2003 and were already accounted for" before American asked its pilots for $660 million in wage and benefit concessions -- and won't count toward meeting that cost-cutting target.
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