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The Honolulu Advertiser
Posted on: Wednesday, July 25, 2007

United Airlines' profits taking off

By Dave Carpenter
Associated Press Business Writer

Hawaii news photo - The Honolulu Advertiser

United Airlines flights, such as this one at O'Hare International Airport in Chicago, were on average 89 percent full last month.

ASSOCIATED PRESS FILE PHOTO | July 2007

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CHICAGO — United Airlines is flying high again — especially overseas.

United parent UAL Corp. reported its most profitable quarter in seven years yesterday, a $274 million second-quarter profit that reflected increased capacity on international routes as well as fuller U.S. flights and lower costs.

Besides having Hawai'i flights in its operations, it has a long-standing marketing agreement with Honolulu-based Aloha Airlines, in which it owns a minority interest.

The second-quarter results easily topped Wall Street estimates and more than doubled the company's earnings from a year ago, when it finished in the black for the first time since 2000. Its shares rose 4 percent in morning trading.

Net income for the April-through-June period amounted to $1.83 per share, up from $119 million, or 93 cents per share, in the same period a year earlier.

Revenue rose 2 percent to a record $5.21 billion from $5.11 billion. Revenue per average seat mile, a much-watched gauge of an airline's health, also climbed 2 percent.

Analysts surveyed by Thomson Financial had estimated a profit of $1.39 per share on revenue of $5.15 billion.

United improved its operating costs, which have been among the highest of any U.S. airline for years. Costs per average seat mile, excluding fuel and severance charges, declined 0.5 percent from the second quarter of 2006 and operating expenses were reduced by $177 million.

Chairman and CEO Glenn Tilton said the results showed solid performance momentum across the board.

"We delivered these results by maintaining good cost control, executing excellent revenue and capacity management and reducing interest expense by paying down and refinancing our debt," he said in a message to employees.

United has prospered in part by selectively cutting capacity, which has made existing flights fuller. It filled 89.1 percent of its seats last month, the highest ever for June.

It also is increasingly relying on its more profitable international network, which helped overall passenger revenues rise 4.5 percent despite flat capacity growth.

The second-largest U.S. carrier, which has gradually improved its financial situation since ending a three-year bankruptcy overhaul early last year, also increased its cash balance in the quarter by $895 million to $5.1 billion. The hefty stash of cash has prompted speculation that the company may initiate a stock buyback or add to its fleet in the near future.

United shares rose $1.93 to $49.17 in morning trading. The stock is up 12 percent this year.