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Friday, September 29, 2000

United warns
of loss

Parent UAL says axed flights
and fuel costs will bring
red ink rather than an
expected profit

Star-Bulletin news services

CHICAGO -- UAL Corp. , owner of United Airlines, will report a third-quarter loss -- instead of the profit analysts had forecast -- after the world's biggest carrier suffered a turbulent summer featuring thousands of cancelled flights and soaring fuel costs.

United Air Lines UAL will probably lose money next quarter also as it absorbs higher than anticipated costs from a proposed contract with pilots and future agreements with other workers, Chairman and CEO James Goodwin said in a news release this morning.

UAL was expected to earn 97 cents a share in the third quarter and 63 cents in the fourth, the average estimates of analysts surveyed by First Call/Thomson Financial.

Shares in UAL tumbled $2, or nearly 5 percent, to close at $42 on the New York Stock Exchange. The stock has lost nearly a third of its value since mid-July.

Last month's tentative settlement with pilots, which provides for an industry-leading contract, will result in higher-than-expected costs in other labor contracts, he said.

United's troubles began in April when it missed a target for wrapping up a contract agreement with pilots, leading unhappy cockpit crews to start refusing overtime. Flight cancellations and lost revenue mounted.

United faced negotiations on new contracts this year with its two biggest and most powerful unions, the Air Line Pilots Association and the Machinists. Both contracts became amendable this year as UAL ended a program under which those union workers had taken pay cuts in exchange for company equity.

Just as those talks were beginning to become contentious, UAL startled its unions and other airlines by announcing the industry's biggest airline acquisition, offering to pay $11.6 billion for US Airways Group Inc. The pending merger has led pilots and others workers to seek higher wages and more job security as concessions for their cooperation.

United executives have admitted that the flight disruptions linked to the pilots created pressure to wrap up a contract. Now, the more than 20 percent raises offered to the pilots has driven up wage increase expectations among United's baggage handlers, ramp workers, mechanics and flight attendants.

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