"UAL reports $623 million loss"

Saturday, August 2, 2003

UAL reports $623 million loss
By Dave Carpenter
The Associated Press


CHICAGO -- United Airlines' parent company on Friday reported a $623 million
second-quarter loss, despite receiving $300 million in government aid, as
the war in Iraq and SARS contributed to the bankrupt carrier's woes.

The loss was the smallest of the past four quarters, as the world's
second-biggest carrier continues to target an early 2004 exit from Chapter
11.

"Despite the continued difficult economic environment, the improvement in
both revenue and cost is encouraging," said CEO Glenn Tilton, touting a new
labor contract that lopped 30 percent off employee expenses.

United's biggest rival, No. 1 American Airlines, narrowed its own net loss
for the quarter to $75 million, and other major U.S. carriers posted profits
thanks to the government aid.

But United remained deep in the red because of depressed international
passenger travel amid the war and severe acute respiratory syndrome. That
combined with tough competition from discount carriers and its own
restructuring costs.

The net loss for the April-June quarter amounted to $6.26 a share, compared
with a loss a year earlier of $341 million, or $6.08 a share.

Results included United's $300 million share of a federal aid package
covering airport security costs during the Iraq war, a $365 million
income-tax refund and $152 million in charges related to layoffs.

Revenues were $3.11 billion, down 18 percent from $3.79 billion a year
earlier in a reflection of the airline's 14 percent reduction in capacity.

The operating loss, excluding certain items, was $431 million, improved from
$485 million in the second quarter of 2002.

The airline said it met its lenders' requirements for bankruptcy progress in
June for a fifth straight month and expects to have met the standard for
July.

Standard & Poor's analyst Philip Baggaley noted that UAL still risks
breaching its financing covenants later this year as requirements become
more stringent.

"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."

The company said its cash position, which is watched closely as a sign of
its progress, increased slightly to $2.3 billion in the quarter -- including
$684 million in restricted cash. Excluding the government reimbursement and
tax refund, cash flow was a positive $2 million per day.

United's financial restructuring also is further strengthening its
once-troublesome daily operations. As a part of that restructuring, the
airline laid off 1,100 mechanics when it closed its Indianapolis repair base
in April.

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