UAL posts massive loss on accounting charges, to cut 5,500 frontline workers
Wednesday July 23, 2008
United Airlines parent UAL Corp. reported a second-quarter net loss of $2.7 billion mostly attributable to $2.6 billion in previously announced accounting charges, reversed from a $274 million profit in the year-ago period, and said it will slash 5,500 frontline workers by the end of 2009 in addition to the 1,400-1,600 salaried and management employees and contractors it already planned to cut.
The carrier yesterday also announced an increase in its planned fourth-quarter mainline capacity reduction to 11.5%-12.5% and said it reached an agreement in principle with Chase Bank USA, its frequent-flier bank card partner, and credit card processor Paymentech that will increase its cash liquidity by $1.2 billion.
The steep quarterly loss did not come as surprise since UAL earlier this month had revealed the noncash accounting charge, which included $2.3 billion in goodwill impairment (ATWOnline, July 14). It said it would have posted a $151 million second-quarter loss absent the special charges.
As for capacity, it previously planned to cut fourth-quarter mainline ASMs by 9.5%-10.5%. Domestic capacity now will be lowered 15.5%-16.5% in the quarter. Total mainline capacity will be cut another 10%-11% in 2009 compared to 2008 and domestic capacity will be reduced 12.5%-13.5%.
"Our industry is challenged as never before by the unrelenting price of oil and United is taking aggressive action to offset unprecedented fuel costs and to strengthen the competitiveness of our business," Chairman, President and CEO Glenn Tilton said.
Second-quarter revenue rose 3% to $5.37 billion but expenses, including the goodwill impairment charge, soared 72.5% to $8.07 billion. Fuel cost jumped 53.2% to $1.85 billion. Operating loss was $2.69 billion, reversed from an operating profit of $537 million last year. Mainline traffic decreased 4.5% to 29.44 billion RPMs on a 1.3% drop in capacity to 35.39 billion ASMs, producing a load factor of 83.2%, down 2.7 points. Mainline passenger yield rose 8.2% to 13.88 cents as PRASM lifted 4.7% to 11.58 cents and CASM excluding impairment charges increased 18.6% to 13.03 cents. CASM excluding impairments and fuel lifted 2.6% to 7.8 cents.
by Aaron Karp
Wednesday July 23, 2008
United Airlines parent UAL Corp. reported a second-quarter net loss of $2.7 billion mostly attributable to $2.6 billion in previously announced accounting charges, reversed from a $274 million profit in the year-ago period, and said it will slash 5,500 frontline workers by the end of 2009 in addition to the 1,400-1,600 salaried and management employees and contractors it already planned to cut.
The carrier yesterday also announced an increase in its planned fourth-quarter mainline capacity reduction to 11.5%-12.5% and said it reached an agreement in principle with Chase Bank USA, its frequent-flier bank card partner, and credit card processor Paymentech that will increase its cash liquidity by $1.2 billion.
The steep quarterly loss did not come as surprise since UAL earlier this month had revealed the noncash accounting charge, which included $2.3 billion in goodwill impairment (ATWOnline, July 14). It said it would have posted a $151 million second-quarter loss absent the special charges.
As for capacity, it previously planned to cut fourth-quarter mainline ASMs by 9.5%-10.5%. Domestic capacity now will be lowered 15.5%-16.5% in the quarter. Total mainline capacity will be cut another 10%-11% in 2009 compared to 2008 and domestic capacity will be reduced 12.5%-13.5%.
"Our industry is challenged as never before by the unrelenting price of oil and United is taking aggressive action to offset unprecedented fuel costs and to strengthen the competitiveness of our business," Chairman, President and CEO Glenn Tilton said.
Second-quarter revenue rose 3% to $5.37 billion but expenses, including the goodwill impairment charge, soared 72.5% to $8.07 billion. Fuel cost jumped 53.2% to $1.85 billion. Operating loss was $2.69 billion, reversed from an operating profit of $537 million last year. Mainline traffic decreased 4.5% to 29.44 billion RPMs on a 1.3% drop in capacity to 35.39 billion ASMs, producing a load factor of 83.2%, down 2.7 points. Mainline passenger yield rose 8.2% to 13.88 cents as PRASM lifted 4.7% to 11.58 cents and CASM excluding impairment charges increased 18.6% to 13.03 cents. CASM excluding impairments and fuel lifted 2.6% to 7.8 cents.
by Aaron Karp
