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Bankrupt United Air Parent's Loss Widens

UAL Corp. (search) , parent of bankrupt No. 2 U.S. airline United Airlines (search), on Thursday reported a wider net loss in the second quarter, including expenses attributed to its reorganization.

It also said a threatened strike by United Air's flight attendants is illegal and "will not be tolerated." It said it would do whatever necessary to ensure the continued smooth operation of the company.

The airline currently faces strike threats from its flight attendants' union if the workers' pension plans are not reinstated.

The No. 2 U.S. carrier, which has been in Chapter 11 (search) since December 2002, said its net loss increased to $1.43 billion, or $12.33 per basic share, from $247 million, or $2.25 per share, a year earlier.

Excluding the special and reorganization items, UAL's net loss for the second quarter totaled $26 million. The carrier said these reorganization items were expected to be resolved in the bankruptcy process and settled for a minor fraction of the amount of the charges.

The carrier has said it will file its reorganization plan around Aug. 1.

"Although the harsh economic environment, including very high fuel costs, presents difficult challenges for the industry, United's restructuring has earned us the opportunity to compete for a place among the leading network carriers," United's Chief Executive Glenn Tilton (search) said in a statement.

One analyst said United's cost cuts in Chapter 11 have made it viable, but that the company needs a change in management if it is to compete long-term with key rival AMR Corp's (AMR)American Airlines. America last week said its second-quarter profit rose to $58 million.

"At this point there is almost no way they can go out of business. It's too strong a business," airline consultant Michael Boyd said. "Going forward United will be a permanent part (of the industry). But at some point in time, there has to be some changes in management at the top."

United has been battered along with the rest of the airline industry by soaring fuel costs and competition from low-cost rivals.

The carrier in the second quarter managed to wring $700 million in average annual savings from its work force and dump its underfunded pensions on government insurers. The pension shift saves the company about $645 million a year but erodes the retirement benefits of employees.