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UAL warns on 3Q profit
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August 17, 2000: 1:15 p.m. ET
World's leading airline cites flight cancellations, loss of bookings
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NEW YORK (CNNfn) - UAL Corp., owner of troubled United Airlines, warned investors Thursday that third-quarter profit will miss expectations as customers flee to other carriers due to flight cancellations.
The cancellations result from a refusal by pilots to fly overtime due to lack of agreement on a new contract and objections to the company's plans to purchase US Airways Group Inc. (U: Research, Estimates). The world's largest airline now says it will not meet the already lowered $2.60-to-$3.20 a share earnings range it issued July 19 when it reported second-quarter results.
 "Although booking patterns remained strong through early August despite poor operating performance, booking levels have since fallen on the adverse publicity surrounding the cancellations that occurred in early August," James Goodwin, CEO of the employee-owned company, said. "While our operating performance has improved somewhat, the reduced booking levels continue, and as a result, revenues are not as strong as we had previously anticipated," he added.
Analysts already had lowered their third-quarter forecasts, with the consensus of earnings tracker First Call at $2.75 a share, down from $3.18 as recently as Aug. 8. The forecast had been as high as $3.55 a share for the third quarter before July's warning.
Fourth-quarter forecasts also have fallen to $1.29 a share from $1.40 on Aug. 8 and $1.61 a share before the July warning.
"They're going to lose some of these customers," said Ray Neidl, analyst for ING Barings. "If they can solve their problems by September, the problem will be limited. If it goes past September, they'll have trouble winning back the higher yielding customers."
Pilots unhappy with negotiations progress
The pilots, who own a 25 percent stake in the company, are trying to reach their first contract since they became part owners of the carrier in 1994, and received stock in return for wage concessions that left them below other carriers' pay scales.
The pilots walked away from the negotiating table last Friday, saying there had not been enough progress.
"We will not modify another single position until we see a substantial effort on the company's part to move the process along," said Rick Dubinsky, a United captain and head of the Air Line Pilots Association's bargaining unit at the airline.
Kathie White, a spokeswoman for ALPA, said the two sides returned to the table along with federal mediators on Wednesday, but she said she could not comment on any progress in the talks.
The union also has gone on record objecting to the proposed purchase of the nation's number six carrier, US Airways, due partly to fears about how it would affect the seniority rights of its members.
The company said the uncertainty about labor negotiations makes giving new earnings guidance for the third quarter impossible at this time.
"We are focused and committed to resolving the causes of this difficult operating situation that has not only greatly inconvenienced our customers but many of our employees as well," Goodwin's said.
Striving to keep key business customers
UAL spokesman Joe Hopkins said Thursday that the airline is trying to keep its most frequent and profitable business clients happy by raising mileage bonuses they receive.
He confirmed that the airline will announce later Thursday that "premier" members, who fly 25,000 miles annually and normally get a 25 percent bonus on their mileage accounts, will get a 50 percent bonus instead, retroactive to May 1. Customers who fly more than 50,000 miles annually and normally get a 100 percent bonus on miles will get a 200 percent bonus.
The increases in mileage rewards were originally detailed in Thursday's Wall Street Journal. The paper said those clients account for 9 percent of the customer base, but 46 percent of revenue.
 In other news, United exercised the option to buy six of the Airbus Industrie's A319s and six A320s. The option for the narrow-body jets was originally placed in 1998.
Thursday's announcement brings to 31 the number of Airbus jets United Airlines has ordered this year. The planes are due to be delivered in 2002.
United has so far ordered 164 Airbus jets and currently operates a fleet of 30 A319s and 62 A320s, making it the third largest fleet of Airbus aircraft worldwide and the No. 1 operator of Airbus aircraft in North America. But it is still a small part of United's overall fleet. The airline operates 257 narrow-body jets from Boeing Co. (BA: Research, Estimates), although it does not have any pending orders for Boeing narrow bodies. All of its wide-body jets are from Boeing.
Shares of UAL (UAL: Research, Estimates) were off 7/8 to 48-5/8 in early trading Thursday. 
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