UAL's second-quarter deficit is $623 million, or $6.26 a share

THE BALTIMORE SUN

CHICAGO - Even with a sizable cash handout from the government, United Airlines posted a second-quarter net loss yesterday that's larger than any other major U.S. carrier's.

The airline, operating under bankruptcy protection since December 2002, said it lost $623 million, or $6.26 per share, in the quarter as revenue dropped 18 percent.

Excluding the $300 million in government aid that United received under the Emergency Wartime Supplemental Appropriations Act and special items connected to its bankruptcy, the nation's second-largest airline posted a net loss of $476 million, or $4.79 a share.

As were other carriers, United was hit hard by rising costs and reduced demand for air travel beginning in 2001, particularly after Sept. 11. But this year's second quarter posed additional challenges.

Depressed international passenger travel because of the war and SARS, coupled with tough competition from discount carriers, kept United deep in the red despite a new labor deal that cut costs by $543 million, or 30 percent, for the quarter.

American Airlines posted an operating loss of $357 million and a net loss of $75 million. Delta Air Lines reported a net profit of $184 million and a loss of $237 million excluding special items.

Concerns about Iraq and SARS tailed off toward the end of the quarter, helping many U.S. carriers.

"The second quarter began as a severe challenge for United and the industry as a whole, but we saw a particularly positive trend as we moved through the period," said Glenn Tilton, chairman and chief executive of UAL Corp., United's parent.

"This quarter is going to be a determining situation, as we see the full effect of a lot of the cost cuts that have been implemented," said analyst Ray Neidl of Blaylock and Partners. "How much traffic falls off and what happens to the economy and to industry pricing are going to be the keys for United."

Operating revenue for the quarter dropped 18 percent to $3.1 billion.

Operating expenses dropped as well, by 17 percent to $3.5 billion. The drop came largely because of a $543 million, or 30 percent, decrease in salaries and related costs. The amount includes a drastic reduction in wages, changes in benefits and changes in work rules and productivity improvement associated with United's new collective bargaining agreements.

Besides the $300 million in federal aid, United's results included a $365 million income tax refund.

Although United beat a consensus of analysts' expectations by reporting a net loss of $4.79 per share, compared with the $5.34 net loss that was expected, analysts said that does not matter as much as the report UAL filed with U.S. Bankruptcy Court yesterday.

United's monthly operating report for June shows that it maintained a strong cash balance that month and, for the fifth consecutive month, met requirements of its debtors' financing agreements.

The Chicago Tribune is a Tribune Publishing newspaper. The Associated Press contributed to this article.

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