Jan. 21 — United Airlines parent UAL Corp., hit as expected by a one-two punch of operating losses and charges linked to earlier fuel-price hedging trades, reported a $1.30 billion fourth-quarter loss Wednesday and said it plans to cut an additional 1,000 salaried jobs in the year ahead.
Like its rivals, the Chicago-based airline holding company has been hit hard by a decline in traffic, as consumers and business travellers alike respond to the weakening economy by flying less.
In addition, United and other carriers responded to soaring jet-fuel prices in the year's first half by signing "hedging" contracts that protected them from the expensive run-up — but those derivative-based agreements turn for the airlines when jet fuel prices drop, as they have over the past several months.
UAL had a loss of $547 million, or $4.22 a share, excluding the impact of fuel and other unusual charges; including such costs, which include "mark-to-market" accounting charges for hedge bets extending into the future which promise to yield losses, UAL had a net loss of $1.3 billion, or $9.91 a share, compared with a loss in the year-ago quarter of $53 million, or 47 cents a share.
UAL said that the early upturn in jet-fuel costs, and the costs associated with the hedge-bets that eventually turned expensive, raised its fuel-related expenses by $2.9 billion compared to the prior year. That had the effect, Chairman and Chief Executive Officer Glenn Tilton told workers in an e-mail, of "masking improvements in every other area of our business."
The company, he told employees, has been able to offset such negative factors and remain competitive despite tough conditions "by dramatically reducing our overhead costs, focusing first on eliminating non-value-added work and on process improvement."
Those efforts, he said, will now make it possible for UAL to reduce its salaried and management staff by 1,000 positions, in addition to the 2,500 cuts the company previously announced. UAL, he noted, had 9,000 such jobs in 2007, but with the two rounds of cuts that have been announced will have reduced the ranks of that workforce by nearly 30 percent.
The business improvements the company has effected, Tilton said, "will hold us in good stead in 2009."
UAL's revenues inched up less than one percent, to $20.19 billion.
AMR Corp., parent of United rival American Airlines, reported a smaller but still unwelcome fourth-quarter loss Wednesday.
Investors were unsettled by both companies' performance: shares of AMR were down 26 percent at $7.61 in late-morning New York Stock Exchange trading, and UAL shares dropped 13 percent to $10.10.
