Poised to leave bankruptcy despite continuing losses, United Airlines reported a fourth-quarter operating loss of $182 million Friday that showed significant improvement after a three-year restructuring but still ran its money-losing streak to 5 1/2 years.
The nation's No. 2 airline and its parent UAL Corp. plan to emerge from Chapter 11 on Wednesday.
The net loss was a record $16.9 billion for the fourth quarter and $21.2 billion for the year, virtually all non-cash reorganization expenses. Most of those on-paper losses will be reversed within weeks, however, reflecting unsecured claims that will be settled for a fraction of the charges upon exit from bankruptcy.
The company is expected to disclose a multibillion-dollar gain when it reports first-quarter results, formally accounting for the overturning of many of those losses.
CEO Glenn Tilton cited cost reductions, strengthened revenue and the improved operating showing as evidence United is ready to come out of bankruptcy, adding that the company "can do better."
"These results set us on track for the year ahead," he told employees in a recorded message. "We will push forward and build on this momentum, knowing there is much to be gained simply in improving our execution, and our continuous improvement initiatives all throughout the company."
Near-record fuel costs remain a huge concern for United, as with all other carriers. Elk Grove Village-based United said the recent surge in oil prices means it will spend another $885 million on 2006 fuel costs than it estimated just recently.
"The external environment is still very difficult, and we expect that they're likely to report a loss this year" despite all the restructuring measures taken, said Philip Baggaley, airline analyst for Standard & Poor's Corp. "They're heading in the right direction, but they're not out of the woods yet."
Fuel costs that were 44 percent higher than in the fourth quarter of 2004 contributed significantly to the operating loss, which nonetheless was a $388 million improvement over the same quarter a year earlier. The company said revenue gains and non-fuel cost reductions, including a 27 percent drop in salary-related costs due to United's labor shake-up, helped offset a $397 million increase in spending on fuel.
The net loss amounted to $145.47 per share, compared with a net loss of $741 million, or $6.39 per share, a year earlier. Excluding reorganization and one-time items, the company said the net loss was $297 million.
Revenue was $4.4 billion, up 10 percent from $4 billion.
Some industry analysts say that even the extensive cost-cutting done by United since 2002 - whacking $7 billion off its annual expenditures - may not have gone far enough, particularly with rivals Delta Air Lines Inc. and Northwest Airlines Corp. now doing their own cost-slashing in bankruptcy court.
"Cost is the name of the game and I'd like to see that a little bit lower," said Ray Neidl of Calyon Securities.
Morningstar analyst Chris Lozier said United's competition among other legacy carriers may even get tougher with possible bankruptcy reorganizations by American Airlines parent AMR Corp. and Continental Airlines Inc. down the road.
For now, he said: "They (United) are ready to come out and be competitive with the best legacy carriers, but they're still not going to be competitive with the low-cost carriers. I don't know that the cost-cutting they've done is going to be enough."
For the full year, the net loss amounted to $182.29 per share, compared with a net loss of $1.72 billion, or $15.25 per share, in 2004. Revenue rose 6 percent to $17.4 billion from $16.4 billion.
The company said the 2005 net loss without reorganization and special items was $557 million, or less than half that of the previous year. The operating loss was $219 million.
United's current shares will be virtually wiped out when it leaves bankruptcy. The company's new stock will begin trading next week on the Nasdaq Stock Market under the symbol UAUA.
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