United parent posts
ninth loss in a row

UAL lost $889 million
in the third quarter

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By Dave Carpenter
Associated Press

CHICAGO >> The parent company of ailing United Airlines reported an $889 million third-quarter loss today, its second-biggest quarterly deficit ever, reflecting the continued bleak environment for U.S. carriers.

It was the ninth consecutive quarterly loss for UAL Corp., which is negotiating with its unions to shed billions of dollars in costs in a bid to avoid filing for bankruptcy.

The only worse quarterly result was the $1.16 billion loss in last year's third quarter, when the terrorist attacks threw the airline industry into a tailspin from which it has yet to recover.

Disclosing its first significant details on weeks-old concession talks, United said the company and a coalition of union leaders have set a target of $5.8 billion in labor cost savings over 5 1/2 years -- a middle ground between what management had sought and unions had publicly agreed to provide. But chief financial officer Jake Brace acknowledged that negotiations with individual unions are moving "at various paces" -- an apparent reference to resistance by the powerful machinists union.

The latest net loss amounted to $15.57 per share, compared with the record $21.43 a share loss a year earlier.

Before special charges, including $418 million to establish a valuation allowance against its deferred tax asset, the loss was $8.82 per share. That was a bigger loss than the $7.42 a share consensus estimate of analysts surveyed by Thomson First Call.

UAL shares closed down 2 cents at $1.71 on the New York Stock Exchange after initially sinking to $1.41 -- below their four-decade closing low of $1.51.

Operating revenues sank 9 percent to $3.7 billion from $4.1 billion a year ago.

J.P. Morgan analyst Jamie Baker attributed the decline partly to "passenger avoidance" because of the stigma of near-bankruptcy, even though United's on-time performance has been among the industry's strongest lately.

"From a passenger perspective, there's no reason to avoid United Airlines," Baker said. "That being said, their revenue trends were among the worst in the industry ... and far worse than we expected."

United said a tentative recovery in the beginning of 2002 has stalled due to less business travel, the increasing use by business travelers of leisure fares, increased awareness of discount fares because of the Internet and excess industry capacity which makes leisure fares "too low."

The Elk Grove Village, Ill.-based airline said it burned through cash at a rate of $7 million a day in the quarter, up significantly from the previous quarter. It said the daily loss rate "will be even worse in the fourth quarter due to seasonal trends and the continued weak revenue environment."

Despite the continued hemorrhaging of cash, CEO Glenn Tilton insisted that "at this point, nobody should consider a Chapter 11 filing inevitable.

"While no one underestimates the magnitude of the challenge, we are making good progress on our financial recovery program," he said. "We continue to work vigorously with all of our unions and other parties to achieve our No. 1 goal: restoring the financial health of this airline without the necessity of an in-court process."

The 55 percent employee-owned company and its unions have remained largely silent on specifics of negotiations aimed at cutting costs and obtaining a $1.8 billion federal loan guarantee, which the airline says is critical for it to meet impending debt payments and avoid bankruptcy. United called off its usual earnings conference call, citing the inappropriateness of discussing the delicate talks publicly.

Besides disclosing the $5.8 billion compromise target -- Tilton's predecessor had sought $9 billion over six years, while the unions had agreed to provide $5 billion over five years -- United also said:

>> it intends to revise its loan guarantee application to the Air Transportation Stabilization Board next week with an updated business plan that includes details on cost-cutting.

>> a team of senior management representatives has developed a plan to achieve at least $1.4 billion in annual savings from their side.

Since last turning a profit in the second quarter of 2000, United has lost $4 billion along with its status as the world's largest airline. Its third-quarter loss was exceeded only by current No. 1 American Airlines, which posted a $924 million loss earlier this week.