UAL 4Q loss widens
United Airlines parent loss less than expected but sees significant 1Q loss.
NEW YORK (CNN/Money) - United Airlines parent UAL Corp. Friday saw its fourth-quarter loss rise sharply from a year earlier, although it was a smaller loss than Wall Street expected, and said it is confident it will be able to win wage reductions from its unions.
But company officials refused to discuss a published report that it may be looking at a bankruptcy filing later this year, or say whether it would seek federal loan guarantees that would require it to give up an equity stake in the company to the federal government.
For the quarter ended Dec. 31 UAL posted a loss excluding items of $640 million, or $11.74 a share, compared with a loss of $124 million, or $2.41 a share, a year earlier. Analysts on average anticipated the company to post a loss of $14.96 a share, according to earnings tracker First Call.
Shares of UAL (UAL: down $0.57 to $14.13, Research, Estimates) fell about 3 percent in early trading Friday following the report.
Fourth-quarter revenue tumbled 38.5 percent to $2.9 billion from $4.8 billion. Miles flown by paying passengers fell 24 percent in the quarter compared with a year earlier, and the average amount paid per mile by passengers fell 20 percent.
The New York Times quoted some analysts and unnamed competitors Friday as saying they expect UAL to file for bankruptcy protection before the end of this year.
UAL Chief Financial Officer Jake Brace was repeatedly questioned by reporters Friday about whether a bankruptcy plan was being considered or even a possibility, but he refused to address the issue directly, saying only that the company was focused on a financial recovery plan.
"We're very fortunate we went into this with a very strong asset base and a lot of liquidity," he said at one point in a press call. "We think we have enough time to implement the recovery plan. That's what cash and assets and liquidity do - give us enough time."
The company said it ended the year with about $2.6 billion in cash, and announced a new line of financing to bring it $775 million. Brace said the company has yet to make a decision on whether to seek federal loan guarantees.
The company said that its cash flow, which represents profit or loss plus the value of depreciation and amortization, was better than expected, although its daily cash drain from losses averaged $10 million in the quarter. The company said it beat its internal target with improved cost controls, and it will work to further cut labor costs, which make up 38 percent of operating expenses.
Last month the company agreed to give its mechanics a 37 percent pay increase, following recommendations of a federal panel appointed by President Bush to avoid a strike. The panel called for all unions to negotiate concessions, though. The rank and file mechanics are now voting on the panel's wage recommendation.
"We are working with our unions to get contracts settled and to further reduce wage costs," said a statement from CEO John Creighton. "I am confident they will respond constructively."
Brace said that before the airline could win concessions from any union it had to conclude the contract with the mechanics, who are represented by the International Association of Machinists, and another IAM contract covering customer service employees, ramp workers and other employees. The IAM and United are due back at the negotiating table on the non-mechanics' contract Feb. 12.
Some early signs of recovery
The company said that it is seeing some early signs of a return of traffic, and that because of that it will add about 127 daily flights to its schedule come April.
Passenger revenue per mile was off about 15 percent to 17 percent in January from a year earlier, which is better than the 20 percent year-over-year decline reported in the fourth quarter. The booking rates for February are ahead of a year ago, while March is about the same as a year ago. But it said it is seeing some softness in the market after Feb. 20, and that despite some positive signs it expects a significant loss again in the first quarter.
First Call's forecast calls for a loss of $9.96 a share, up from a loss of $5.82 a share a year ago. Brace refused to give any specific earnings guidance or predict when the airline might be able to return to profitability.
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Special items included federal assistance worth $3.03 a share that came as part of the industry bailout passed in the wake of the Sept. 11 terrorist attack, as well as another gain of $3.03 a share for the sale of Galileo International, Inc., its computerized reservation system, to Cendant Corp. (CD: down $0.63 to $16.85, Research, Estimates). Including all special items the net loss came to $308 million, or $5.68 a share, up from the net loss of $71 million, or $1.40 a share, a year earlier.