United posts record airline industry loss

United Airlines has joined the club of struggling carriers

UAL Corp, the parent company of the second largest US carrier United, has reported a record net loss of $2.1bn (£1.49bn) in 2001, the worst in airline history.

While our financial results this quarter reflect a decline in both business and leisure travel, during the fourth quarter we saw signs that air travel is slowly beginning to recover

Jack Creighton
United chairman and chief executive

It joins the list of US airlines reporting steep losses following the 11 September attacks, which compounded the slump in lucrative business travel caused by the economic downturn in the United States.

UAL's yearly loss beats the $957m it lost in 1992, this year's $1.7bn loss at bigger rival AMR Corp, parent of American Airlines, and the $2bn loss at smaller competitor US Airways.

Executives at the 75-year-old airline refused to talk about the possibility of filing for bankruptcy protection, pointing to the company's $2.6bn cash pile.

The record loss for any single airline before 2001 was $1.23bn reported by Continental Airlines in 1990, according to figures from consulting firm BACK Aviation Solutions.

Better than expected

"While our financial results this quarter reflect a decline in both business and leisure travel, during the fourth quarter we saw signs that air travel is slowly beginning to recover," chairman and chief executive Jack Creighton said in a statement.

UAL reported a fourth-quarter net loss of $308m, compared with a net loss of $71m in the October to December period a year ago.

Before special items - such as $261m in government cash aid following the attacks on the US - the company lost $640m in the quarter.

Revenues tumbled by 40%.

"While the loss was huge, the results were much better than our... loss forecast," said Michael Linenberg, an analyst at Merrill Lynch.

"On balance, we are encouraged by the results."

The top eight US airlines have now posted a combined fourth-quarter net loss of $3.2bn, including a $64 million profit at trend-bucking Southwest Airlines.

Shares of UAL were down 7% in afternoon New York Stock Exchange trading, to $13.66, about half their pre-attack level.

No rosy future

But the future of the company is far from rosy.

UAL has one of the highest labour costs in the industry and is trying to reach an agreement with its workers, who are threatening to strike if the company does not agree to raise wages by a third.

Chief financial officer Jake Brace blamed unresolved labour contracts with mechanics and other ground workers as an impediment to turning the airline around.

"I think labour is very realistic... We all know additional sacrifices need to be made," Mr Brace said, indicating there would be reductions "several billion" dollars worth of concessions in labour costs, meaning job cuts.