Some more good news for all the skeptics to cry over:
Denver Post, 5-6-03
United sees rewards of revamping
Airline expected to boost bottom line, begin hiring
By Andy Vuong, Denver Post Business Writer
Cost-cutting measures and one-time gains could enable United Airlines, which posted the largest first-quarter loss of any U.S. carrier, to boost its second-quarter bottom line by as much as $1.2 billion.
And after cutting more than 20,000 jobs in the past year, the company plans to start hiring again in June.
United said Monday that it expects to reap the benefits of renegotiated aircraft leases beginning this quarter, which could translate into savings of up to $125 million. Plus, United''s new labor contracts, implemented last week, will cut costs by an estimated $430 million during the quarter.
DETAILS
2ND-QUARTER BOOSTERS
After posting a $1.3 billion first-quarter loss, United Airlines'' second-quarter loss is expected to be significantly less because of the carrier''s cost-saving initiatives and one-time gains. Estimated savings and gains:
$430 million in savings from new labor contracts
$125 million in savings from renegotiated aircraft leases
$270 million government war- relief fund
$365 million tax refund (actual figure)
The company also received a $365 million tax refund in April and is expected to garner $270 million or more in war-relief aid from the government this month.
The savings and one-time gains come on the heels of a $1.3 billion first-quarter net loss and at a time when the carrier is under pressure to show financial improvements to meet crucial bankruptcy loan covenants.
Analysts believe the company''s second-quarter financial performance will provide a better gauge of where the company stands in its restructuring efforts.
"Given that some of these new arrangements are starting to kick in now, (the second quarter) will be more of a picture of what it might look like in the future, certainly more so than the first quarter," said Nicolas Owens, an airline analyst with Morningstar.
Wall Street analysts polled by Thomson First Call on average expect United to post a $600 million second-quarter operating loss, which doesn''t include one-time charges and gains, such as the tax refund. The company posted an operating loss of $958 million in the first quarter.
United didn''t disclose how many aircraft leases it has renegotiated, only saying that it has made "substantial progress" and expects to see "significant savings" in the second quarter. The company, which is looking to save $500 million annually through new aircraft and airport leases, has until August to complete lease negotiations.
United secured annual labor concessions of $2.6 billion last week. The new contracts cut wages, changed work rules and allowed the company to permanently close massive maintenance centers in Indianapolis and Oakland.
United said Monday that it will focus on revenue-boosting initiatives, such as fare sales, now that it has completed most of its cost-cutting efforts.
"Over the next several months ... we will build on several recent initiatives, including the introduction in January of lower business fares, as well as increased advertising about fare sales and targeted fare promotions," the company said in a taped message to employees.
United slashed fares by up to 70 percent in January.
The company can implement another fare sale because it has been able to cut costs drastically while operating under bankruptcy protection, said Richard Gritta, a professor of finance and transportation at the University of Portland in Oregon.
"They can price lower than everybody else. Because of that, they can terrorize their competition," Gritta said.
Also Monday, United said it will start hiring again this summer because its new labor contracts will lead to thousands of early retirements by June 30.
"There will be a need to bring employees back into the workforce," said spokesman Jeff Green.
He said the company will start by recalling workers who have been furloughed or placed on temporary unpaid leave.
United''s flight attendants union also said the company will likely start recalling laid-off employees in June because of increases in flight schedules.
United filed for bankruptcy in December.