United Air parent's loss widens on fuel costs
Monday May 8, 10:22 am ET
By Kyle Peterson
CHICAGO (Reuters) - UAL Corp. (NasdaqNM:UAUA - News), parent of United Airlines, on Monday said its first-quarter loss increased by 1.3 percent as the company grappled with record high fuel prices.
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But the No. 2 U.S. airline said that with the inclusion of special reorganization items, it had a $23 billion profit. In past quarters, one-time reorganization items accounted for staggering quarterly losses.
UAL, which exited bankruptcy on February 1, said its loss, excluding the reorganization benefits, for the full quarter widened to $306 million from $302 million a year earlier.
The company did not provide results on a per share basis for the full quarter because it issued fresh shares on Nasdaq when it emerged from bankruptcy. The company reported a loss of $1.95 per share in the two months ended March 31.
Wall Street analysts had a average forecast for a loss of $1.73 per share, according to Reuters Estimates.
"The big question mark obviously remains the fuel. This is still a painfully large loss for the quarter," said Chris Lozier, equity analyst at Morningstar.
"Who knows what crude could do?" he said. "(Rising) ticket prices are helping, but we don't count on those going up much in the short term."
UAL shares were down 77 cents, or 2 percent, at $38.17 in early trade.
The company said its emergence from bankruptcy resulted in a new reporting entity and that its first-quarter results before February 1 combined with those after February 1 do not necessarily provide comparable data to previous quarters.
The company said that including primarily noncash reorganization gains, it earned $23 billion in the first quarter. That profit is due to the "discharge of liabilities" as the company exited bankruptcy, UAL said.
The discharge of liabilities relates to unsecured claims arising from the bankruptcy process, such as the termination of the company's defined benefit pension plans and aircraft-related claims.
The airline said its total revenue increased by 14 percent to $4.47 billion. UAL ended the quarter with an unrestricted cash balance of $3.6 billion.
"The improved revenue environment essentially compensated for record high fuel expense," UAL's Chief Financial Officer Jake Brace said in a statement.
The airline industry has suffered under the weight of soaring fuel costs and low-fare competition that makes it hard for carriers to raise ticket prices enough to cover costs. In the last year, however, major airlines have been more successful in raising fares to offset fuel prices.
UAL's fuel price for the first quarter averaged $1.95 per gallon, compared with $1.47 per gallon a year earlier. The airline said it saw about $9 million in benefits from hedging.
UAL said it expects its mainline fuel price to average $2.15 per gallon in the second quarter and $2.06 per gallon for the full year. The airline currently has no fuel hedges in place for the remainder of 2006.
UAL, which spent more than three years in bankruptcy, slashed its costs by $7 billion in that time and plans to cut costs more. The airline said it aims to cut $400 million starting in 2007 beyond the savings it targeted in the business plan it submitted as part of its bankruptcy emergence.
Those cost savings will come from streamlining operations and corporate functions, UAL said.
The airline said it plans to increase its capacity -- or the number of seats it puts up for sale -- by 3 percent to 3.5 percent in the second quarter and by 3 percent to 3.5 percent for the full year.
Those capacity forecasts apply to UAL's mainline operations and those of its regional affiliates.
Monday May 8, 10:22 am ET
By Kyle Peterson
CHICAGO (Reuters) - UAL Corp. (NasdaqNM:UAUA - News), parent of United Airlines, on Monday said its first-quarter loss increased by 1.3 percent as the company grappled with record high fuel prices.
ADVERTISEMENT
But the No. 2 U.S. airline said that with the inclusion of special reorganization items, it had a $23 billion profit. In past quarters, one-time reorganization items accounted for staggering quarterly losses.
UAL, which exited bankruptcy on February 1, said its loss, excluding the reorganization benefits, for the full quarter widened to $306 million from $302 million a year earlier.
The company did not provide results on a per share basis for the full quarter because it issued fresh shares on Nasdaq when it emerged from bankruptcy. The company reported a loss of $1.95 per share in the two months ended March 31.
Wall Street analysts had a average forecast for a loss of $1.73 per share, according to Reuters Estimates.
"The big question mark obviously remains the fuel. This is still a painfully large loss for the quarter," said Chris Lozier, equity analyst at Morningstar.
"Who knows what crude could do?" he said. "(Rising) ticket prices are helping, but we don't count on those going up much in the short term."
UAL shares were down 77 cents, or 2 percent, at $38.17 in early trade.
The company said its emergence from bankruptcy resulted in a new reporting entity and that its first-quarter results before February 1 combined with those after February 1 do not necessarily provide comparable data to previous quarters.
The company said that including primarily noncash reorganization gains, it earned $23 billion in the first quarter. That profit is due to the "discharge of liabilities" as the company exited bankruptcy, UAL said.
The discharge of liabilities relates to unsecured claims arising from the bankruptcy process, such as the termination of the company's defined benefit pension plans and aircraft-related claims.
The airline said its total revenue increased by 14 percent to $4.47 billion. UAL ended the quarter with an unrestricted cash balance of $3.6 billion.
"The improved revenue environment essentially compensated for record high fuel expense," UAL's Chief Financial Officer Jake Brace said in a statement.
The airline industry has suffered under the weight of soaring fuel costs and low-fare competition that makes it hard for carriers to raise ticket prices enough to cover costs. In the last year, however, major airlines have been more successful in raising fares to offset fuel prices.
UAL's fuel price for the first quarter averaged $1.95 per gallon, compared with $1.47 per gallon a year earlier. The airline said it saw about $9 million in benefits from hedging.
UAL said it expects its mainline fuel price to average $2.15 per gallon in the second quarter and $2.06 per gallon for the full year. The airline currently has no fuel hedges in place for the remainder of 2006.
UAL, which spent more than three years in bankruptcy, slashed its costs by $7 billion in that time and plans to cut costs more. The airline said it aims to cut $400 million starting in 2007 beyond the savings it targeted in the business plan it submitted as part of its bankruptcy emergence.
Those cost savings will come from streamlining operations and corporate functions, UAL said.
The airline said it plans to increase its capacity -- or the number of seats it puts up for sale -- by 3 percent to 3.5 percent in the second quarter and by 3 percent to 3.5 percent for the full year.
Those capacity forecasts apply to UAL's mainline operations and those of its regional affiliates.
