CHICAGO – UAL Corp. (UAL), parent of No. 2 U.S. carrier United Airlines, Friday reported a half billion dollar loss in the first quarter, capping a week of huge industry losses driven by lower fares and air traffic.
UAL -- based in the Chicago suburb of Elk Grove Village, Illinois -- reported its revenue plunged 26 percent, to $3.29 billion from $4.42 billion a year earlier.
The airline was still burning through $5 million in cash a day in the wake of the Sept. 11 attacks on New York and Washington that slashed air travel demand. But that was half the $10 million daily cash burn in the fourth quarter.
"We certainly are seeing signs that our industry's situation is beginning to improve, but there is still a long way to go," said Chief Executive Jack Creighton.
Trying to regain financial altitude, airlines in the last week have tried to raise fares. American Airlines Thursday filed for $20 round-trip increases, resurrecting a similar attempt by Continental Airlines last week, which failed to stick.
UAL's net loss was $510 million, or $9.22 a share in the first quarter, on top of an industry-record loss of $2.1 billion for all of 2001. The first-quarter loss compared with a smaller one of $313 million, or $5.97 a share, in the first quarter of last year.
United said it had nearly $3 billion in cash on hand, an increase of $300 million, thanks to a large federal tax refund, a sale of shares in travel company Cendant Corp. and a private debt placement.
LABOR'S LOVE LOST
But labor issues have hampered Creighton's stated plan to get the airline back in the black. Its stock remains 50 percent below levels posted before the Sept. 11 attacks on New York and Washington. UAL shares rose as much as 2.7 percent to $15.24 in early New York Stock Exchange trading, before easing a bit to $15.00, up 1.1 percent.
After narrowly avoiding a strike by mechanics in March, United is still trying to hammer out a deal with other union employees including ramp and customer service workers.
Creighton took the helm late last year after his predecessor, James Goodwin, was ousted following a public-relations disaster. Goodwin said in a letter to employees that the airline would perish unless losses stopped. Unions, particularly the International Association of Machinists, called for his resignation.
Creighton will meet next week with all of the labor union leaders to ask for their help.
UAL has six labor unions, the largest of which is the IAM.
On a conference call with media and analysts, Chief Financial Officer Jake Brace said the airline is not yet sure it will apply for the loan guarantees enacted by the federal government as part of a $15 billion bailout package after the Sept. 11 attacks.
The application deadline is June 28. Such a deadline "might be helpful for putting together a (financial recovery) plan together with the unions and others," Brace said.
BIG BUT NOT THE BIGGEST
UAL's $510 million net loss was slightly less than the $575 million shortfall posted by rival AMR Corp. , parent of American Airlines, earlier this week. Except for Southwest Airlines Co. , all top carriers have reported significant losses as traffic remains below normal levels.
"While the loss was huge, it was better than both our $10.00 loss per share forecast and the consensus loss of $10.24 per share," said Michael Linenberg, analyst at Merrill Lynch.
Excluding certain items, such as a $52 million charge for shutting down the Avolar fractional business jet venture, UAL's loss was $487 million, or $8.81 per share.
Analysts' estimates ranged from a loss of $9.50 per share to a loss of $11.44, with a mean loss of $10.24, according to market research firm Thomson Financial/First Call.
United received a $464 million federal tax refund on March 20 due to tax law changes included in an economic stimulus package signed by President George W. Bush in March.
UAL pulled the plug on its business jet unit, Avolar, in March as well, after it failed to find an investor to take a majority stake in the business.