Chicago – United Airlines’ parent company reported a net loss of $93 million in May, attributable largely to what its chief financial officer called the “brutal challenge” of higher fuel costs.
UAL Corp. said today it had an operating loss of $21 million for the month, blaming the deficit mostly on fuel expenses that exceeded the May 2004 total by $93 million. Had fuel costs remained unchanged, the company would have broken even for the month on a net basis.
The results included $36 million in reorganization expenses as the company continued the bankruptcy overhaul it began in December 2002.
CEO Glenn Tilton said recently that the airline is on target to emerge from Chapter 11 bankruptcy this fall and predicted it would turn a profit in 2006. But it’s been five years since the Elk Grove Village, Ill.-based company last made money, and that trend shows no sign of disappearing with oil prices more than 65 percent above year-ago levels.
UAL, which reports results monthly to federal bankruptcy court, has lost more than $1.4 billion through five months of 2005 and $6.1 billion since entering Chapter 11 bankruptcy in December 2002.
It has some 6,000 employees in the Denver area.
“Fuel is a brutal challenge for our industry,” said Jake Brace, chief financial officer. “In the face of this challenge, we continue to improve operations across the company, targeting every area of non-labor cost reduction and revenue generation opportunity.” He said United continues to make significant progress toward completing its restructuring.
Spokeswoman Jean Medina reiterated today that the company intends to leave bankruptcy this fall, despite increasing industry skepticism.
Restructuring consultant Bill Brandt called “ridiculous” the idea that United could emerge from Chapter 11 before winter as planned without having already shown more evidence of its preparations, such as completing a business plan and lining up exit financing.
“They are never at a shortage for excuses, but it’s wearing a little thin with customers and everyone else,” said Brandt, president and CEO of Development Specialists Inc., a Chicago-based restructuring and management consulting firm.
United and other airlines will have to adjust their business plans because of spiraling fuel costs, he said, adding that additional fare increases and fuel surcharges are inevitable.
The company boosted its cash total by $143 million in May to $2.6 billion, of which $957 million was restricted. It said the increase was the result of strong receipts and cost controls.
John Tague, the airline’s executive vice president for marketing, sales and revenue, said full second-quarter results, reflecting April-through-June numbers, will be “competitive” as United realizes the benefits of shifting more of its capacity from domestic to international flights.
