UAL Posts 1Q Loss of $152M

UAL Corp. said it added too many flights in January during a slow travel season and was hurt by the storms that crippled flying schedules in February.


CHICAGO -- United Airlines' parent company posted a bigger-than-expected $152 million loss for the first quarter Wednesday, pressured by the reduced domestic passenger demand that has slowed results for U.S. carriers.

UAL Corp. said it added too many flights in January during a slow travel season and was hurt by the storms that crippled flying schedules in February. Its executives said they might reduce U.S. capacity later this year among possible moves to cut costs further and raise revenue.

It was the company's second quarterly deficit in a row, just a year after its emergence from bankruptcy, and investors and analysts showed their disappointment despite United's improvement from last year's first quarter.

UAL shares, already down 12 percent in the past week on signs of weaker domestic results, fell another 88 cents, or 2.2 percent, to $38.28 Wednesday on the Nasdaq Stock Market.

"United is improving but still not there yet," said Morningstar analyst Brian Nelson. "Their international flying is going to have to take them to the finish line. It looks like domestically, yields for U.S. airlines are wavering and ticket prices aren't as strong."

The net loss for the January-through-March period amounted to $1.32 per share, compared with a consensus estimate of a 47-cents-per-share loss by analysts surveyed by Thomson Financial.

A year earlier, the company officially reported a $22.9 billion on-paper profit, but that reflected the reversal of on-paper losses recorded for all of the previous year in bankruptcy. A more meaningful comparison with last year is with its net loss in the first quarter of 2006 excluding certain items of $223 million, or $1.95 per share.

Revenue was $4.4 billion, down 2 percent from $4.5 billion a year ago. UAL blamed that in part on a switch to deferred revenue accounting for its frequent flier program, which resulted in $107 million less in passenger revenue than would have been recorded under the previous method.

Like other airlines, United was pressured by resurgent crude oil prices as well as costly winter storms that forced thousands of cancellations and delays.

But it is reduced U.S. passenger demand that has industry observers wary.

J.P. Morgan analyst Jamie Baker called UAL's results "meaningfully worse" than expected. "Demand (was) the culprit, with mainline, Express, cargo and other all disappointing," he wrote in a note to investors.

Calyon Securities' Ray Neidl agreed that results were disappointing but said the market is overreacting to the industry's revenue outlook, citing solid bookings for the second quarter and beyond.

"At the end of the day, the industry is strong," he said. "We have a couple of good quarters ahead of us domestically. I'm more concerned about the fuel prices."

United said its revenue is expected to increase in the second quarter over a year ago.

CEO Glenn Tilton cited United's lowered operating costs and improved cash flow. The company cut its costs per average seat mile, a key industry barometer, by 4.3 percent from the first quarter of 2006 while operating cash flow increased 38 percent to $626 million.

"In the year since we exited Chapter 11, we have made significant progress," Tilton said. "Our core results show progress on both costs and revenue."

UAL is in the process of moving its headquarters to downtown Chicago from suburban Elk Grove, Ill.

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On the Net:

http://www.united.com


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