No. 1 U.S. airline to post losses

Dave Carpenter

Friday, Sept. 29, 2000 | 11:19 a.m.

In Las Vegas

United Airlines is the third-busiest airline at McCarran International Airport in Las Vegas, trailing Southwest Airlines and America West Airlines.

McCarran reported that in August, United served 262,000 passengers in Las Vegas, down 9.7 percent from August 1999. Year to date, United's traffic in Las Vegas was down 3.2 percent to 2.2 million people.

CHICAGO -- United Airlines' parent company warned today it expects to lose money for two straight quarters as the result of its disastrous summer of delays and cancellations coupled with an industry-leading pilots' contract and costlier jet fuel.

Shares in UAL Corp. tumbled $3.375, or 8 percent, to $40.625 in the first hour of trading on the New York Stock Exchange. The stock has lost a third of its value since mid-July.

"The disruptions to our operations throughout the quarter greatly inconvenienced our customers and front-line employees, reducing revenues significantly," said James Goodwin, UAL's chairman and chief executive.

Last month's tentative settlement with pilots will result in higher-than-expected costs in other labor contracts, Goodwin said.

In a statement, Goodwin said the airline would post a loss in the July-September quarter and "probably in the fourth quarter as well." He didn't specify amounts for either period.

Wall Street already was braced for a drastically worse quarter than a year ago, when United's quarterly earnings were $3.75 a share. Leading airline analyst Sam Buttrick of Paine Webber pegged a loss of 20 cents a share earlier this week.

"The magnitude of the labor increases is certainly discouraging," Buttrick said Friday.

United's strong network will ensure that its operations recover well from the turbulent summer, the analyst said. But the airline will be dealing with revenues lost to labor costs for a long time and may even lose money for 2001, he said, if its proposed $4.3 billion merger with US Airways goes through.

"The good news is that the customers are coming back," Buttrick said. "The bad news is that labor is increasingly successful at intercepting profits that would otherwise flow to shareholders."

United last week promised to reopen wage talks with the union representing its 25,000 flight attendants, who are demanding raises similar to those promised pilots. The flight attendants warned they will take steps to derail the merger if "significant progress" is not made soon.

United's 44,000 machinists, including mechanics and customer service agents, also stepped up their wage demands in contract talks following the pilots' settlement.

Pilots were given immediate pay raises of 21.5 percent to 28.5 percent, followed by four annual 4 percent pay hikes.