UAL loses $367 mil. in third quarter

Dave Carpenter

Friday, Oct. 31, 2003 | 9:29 a.m.

CHICAGO -- A busy summer travel season and lower costs helped boost United Airlines' parent to its first quarterly operating profit since 2000 but were not enough to offset heavy bankruptcy expenses, resulting in a $367 million net loss.

Despite UAL Corp.'s 13th consecutive quarter in the red, CEO Glenn Tilton touted significant financial improvement as clear evidence the airline's nearly year-old federal bankruptcy restructuring is on track.

"We are making tremendous progress in reducing costs, improving revenue and building a strong, sustainable business for the future," Tilton said Thursday.

The latest results were weighed down by $330 million in special charges and reorganization expenses that resulted in a net loss of $3.47 per share for the July-September period. That compared with a loss a year earlier of $889 million, or $15.57 a share.

Excluding those charges, the loss of 36 cents per share easily beat analysts' consensus estimate of a loss of $1.52 a share as calculated by Thomson First Call. Only a handful of brokerages have continued following the company, however, since it filed for bankruptcy and had its stock delisted from the New York Stock Exchange this year.

Revenue rose 2 percent to $3.82 billion from $3.74 billion, thanks to a 12 percent jump in revenue from passengers.

Perhaps the most noteworthy number signifying United's progress, though, was an operating profit of $19 million. The airline calculates operating results excluding not only special charges but such items as interest expense, which totaled $105 million in the quarter and reflect the hefty cost of bankruptcy loans.

The company said it was the first time it had managed an operating profit since the second quarter of 2000.

Besides slashing its labor expenses with new union contracts earlier this year, United has been cutting costs through an overhaul of its aircraft leases and numerous other measures that helped shrink operating expenses by 13 percent from a year ago.

The company also said its overall maintenance costs were down significantly from the third quarter of 2002 because of the ability to outsource maintenance under the new labor agreement.

A smaller fleet and other efficiencies have sharply improved United's daily operating performance. It said September was the best on-time month in its history, with 80.4 percent of flight departures on time. Once an industry laggard, it has been at the top this year in arrival time among major U.S. carriers.

United filed for Chapter 11 last December after 2 1/2 years of worsening losses. Tilton says the company remains on schedule to come out of bankruptcy in the late spring of 2004.

Tilton said in an interview that the company's top executives discussed an updated version of United's new business plan, which has not been publicly disclosed, at a board meeting Thursday. They plan to take it to commercial lenders next week, seeking bankruptcy exit financing that is likely to be easier to obtain based on the improved recent financial results.

Tilton and Jake Brace, the chief financial officer, said the company still has numerous obstacles to overcome.

Those include billions of dollars in required pension payments in 2004-06, which United is seeking to reschedule. In a quarterly report filed late Thursday with the Securities and Exchange Commission, UAL said it could be required to contribute about $4.8 billion to its pension plan trusts by the end of 2008.