United Airlines parent lost $57 million in 3Q but revenue fell less than analysts expected
By Joshua Freed, APTuesday, October 20, 2009
UAL reports $57 million 3Q loss
United Airlines parent UAL Corp. reported a money-losing third quarter on Tuesday but said it is beginning to see signs that business travel could pick up soon.
The recession has hurt business travel at all the big airlines. While United and other carriers have used discounts to fill seats, it will be tough to turn a profit unless higher-spending business travelers begin flying again.
“We have a long way to go, but we are beginning to see encouraging early signs among business and premium travelers, both domestically and internationally,” chief financial officer Kathryn Mikells wrote in a note to employees.
UAL Corp. lost $57 million and revenue fell 20.3 percent to $4.43 billion. But the loss was smaller than analysts expected, and the revenue drop-off per passenger was 14.7 percent, less than in the second quarter.
United reduced flying by 8.2 percent compared to the same period last year. It managed to cut costs at the same time, though, with spending for each mile it flew dropping 1.6 percent, not counting fuel and some accounting charges.
United said it believes that cost controls could mean better per-passenger revenue once business travel improves.
“We continue to be an industry leader in unit cost control and are on our way toward making this an important competitive distinction,” Mikells wrote.
Passengers paid an average of $13 each in charges for add-ons such as checked baggage, better coach seats, and faster trips through boarding for a total of $289 million in fees, United said. The per-passenger average rose almost 13 percent compared to a year earlier.
The third-quarter loss was much smaller than the $792 million loss during the same period last year. That loss was driven by accounting for fuel hedges.
United ended the quarter with $2.5 billion in unrestricted cash. It raised money with debt and a stock offering earlier this month, after the quarter ended.
United is still working through fuel hedges put in place last year when it thought fuel prices would keep rising. It reported losing $131 million on settled fuel hedges in the third quarter, although it also had a $59 million gain on hedges that haven’t settled yet.
United said in June that it would take bids from Boeing and Airbus for replacing some of its biggest planes. On Tuesday, it said it is evaluating those proposals, and that it expects “to make a decision soon on whether to pursue a potential order.”
UAL shares rose 62 cents, or 8.5 percent, to $7.88 in morning trading. The stock has more than doubled in the last three months.
Tags: Business Travel, Travel