Bankrupt airlines loses $623M
By Melissa Allison
Chicago Tribune
CHICAGO — Even with a sizeable cash handout from the government, United Airlines posted a second-quarter net loss yesterday larger than any other major U.S. carrier.
The airline, operating under bankruptcy protection since December, said it lost $623 million, or $6.26 per share, in the quarter as revenues dropped 18 percent.
Excluding the $300 million in government aid that United received under the Emergency Wartime Supplemental Appropriations Act and special items connected to its bankruptcy, the airline posted a net loss of $476 million, or $4.79 a share.
Like other airlines, United was hard hit by rising costs and reduced demand for air travel beginning in 2001, particularly after Sept. 11. But this year's second quarter posed additional challenges.
Air travel was pinched by the U.S.-led war against Iraq and SARS, which hit United hard because of its large presence in Asia.
American Airlines posted an operating loss of $357 million and a net loss of $75 million. Delta Air Lines reported a net profit of $184 million and a loss of $237 million excluding special items.
Concerns about Iraq and SARS tailed off toward the end of the quarter, helping many U.S. carriers.
"The second quarter began as a severe challenge for United and the industry as a whole, but we saw a particularly positive trend as we moved through the period," said Glenn Tilton, chairman and chief executive of UAL Corp., United's parent company.
Ray Neidl, an airline analyst at Blaylock & Partners, said United seems to be making good progress, but that "the real test will be how the summer is (for air travel) and how they continue with cost cutting and their reorganization plan."
Operating revenues for the quarter dropped 18 percent to $3.1 billion.
Operating expenses dropped as well, by 17 percent to $3.5 billion. The drop came largely because of a $543 million, or 30 percent, decrease in salaries and related costs. The amount includes a dramatic reduction in wages, changes in benefits and changes in work rules and productivity improvement associated with United's new collective bargaining agreements.
Besides the $300 million in federal aid, United's results included a $365 million income tax refund.
Although United beat a consensus of analysts' expectations by reporting a net loss of $4.79 per share, compared with the $5.34 net loss that was expected, analysts said that does not matter as much as the report UAL filed with U.S. Bankruptcy Court yesterday.
United's monthly operating report for June shows that it maintained a strong cash balance that month and, for the fifth consecutive month, met requirements of its debtors' financing agreements.
"Meeting those covenants is what makes or breaks them while they're still in Chapter 11," said Nicolas Owens, airline analyst at Morningstar. "They're not throwing down cash as fast as they were before they filed."
