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UAL slashes dividend
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July 4, 2001: 9:36 a.m. ET
United Airlines parent blames downturn in air travel for 84% cut in payout
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NEW YORK (CNNfn) - United Airlines' parent is slashing its quarterly dividend to conserve cash due to the current downturn in air travel.
The move by UAL Corp. (UAL: Research, Estimates) late Tuesday reduces the dividend 84 percent to 5 cents a share from 31.25 cents previously. Shares of UAL edged up 8 cents to $34.78 Tuesday ahead of the late evening dividend announcement.
The reduced dividend is payable Aug. 1 to shareholders of record July 16.
"We recognize the importance of the cash dividend to our stockholders, and we remain committed to rewarding them for their support," CEO James Goodwin said. "At the same time, the current weak economic environment and the uncertain outlook are having significant industry-wide effects on revenue, negatively affecting our overall performance. Therefore, the board believes it prudent to reduce the dividend rate for the time being."
UAL, which is majority owned by its employees, warned in April that it expected to post a second-quarter loss, and that if it didn't see a turnaround in revenue trends it expected a loss for the full year as well. Since then, other airlines have followed with their own loss warnings, citing the severe drop in demand for air travel, particularly higher-priced business travel, prompting deep discounts on tickets during what is normally a profitable summer travel season.
The industry now is expected to post a loss as a whole in the second quarter as it did in the first quarter.
United was particularly hard hit by service problems last year during contentious labor negotiations with its pilots and mechanics. Those disruptions chased away business travelers and prompted losses at United before they were seen at other carriers. The labor agreement with the pilots also raised costs significantly.
Analysts surveyed by earnings tracker First Call now expect UAL to post a loss of $4.73 a share in the second quarter, compared with a profit of $3.47 a share in the year-earlier period, it's most recent profitable quarter. They also forecast that losses will continue in the third and fourth quarters, as well as for full-year 2002.
UAL's dividend move follows Monday's announcement that the airline is in discussions to terminate its $4.3 billion acquisition agreement with US Airways Group Inc. (U: Research, Estimates)
The deal, which would have been the largest in airline history, includes a $50 million breakup fee. But the abandonment of the deal means that United will lose its ranking as the world's largest carrier once American Airlines completes integrating recently purchased Trans World Airlines into its system later this year. 
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United-US Airways talk of grounding deal - July 2, 2001
Airlines start summer sales - June 25, 2001
AMR souring on deal for US Air assets - June 21, 2001
AMR warns of massive 2Q loss - June 18, 2001
Delta's 2Q loss to soar - June 15, 2001
Forecasts for airline profits lose altitude - June 5, 2001
United-US Airways deal still circling - May 28, 2001
Air travelers face better summer than do airlines - May 25, 2001
Airline losses fly over 1Q forecasts - April 18, 2001
TWA to be bought by American - Jan. 10, 2001
UAL-US Air deal draws fire - June 13, 2000
United buying US Airways - May 24, 2000
Special Report: Change in the Air
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United
US Airways
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