United Airlines Earnings Plunge

November 1, 2001 / 8:59 AM EST / AP

United Airlines' parent company, UAL Corp., said Thursday it lost $1.16 billion in the third quarter — the worst loss in its 75-year history.

The loss includes $865 million in special charges and a $391 million cash infusion from the federal government after the Sept. 11 terrorist attacks, which involved two United planes and caused a steep dropoff in U.S. air travel.

Excluding the unusual charges, the nation's No. 2 airline posted an operating loss of $542 million, or $10.05 per share for the three months ended Sept. 30. That's slightly better than the $10.27 consensus estimate of analysts surveyed by Thomson Financial/First Call but by far its most dismal quarter ever.

United already was deeply troubled before the attacks, suffering from the industry's highest labor and operating costs and a falloff in business travel, on which it depends heavily.

Revenue for the third quarter was off 16 percent to $4.1 billion from $4.9 billion a year earlier.

The net loss, with all charges included, amounted to $21.43 a share.

UAL shares closed trading Wednesday on the New York Stock Exchange at $12.72, down 67 percent this year. That's their lowest level, adjusting for splits, since April 10, 1987, according to the Center for Research in Security Prices at the University of Chicago's Graduate School of Business.

The airline said results have worsened since the quarter ended and it expects a "substantially greater" operating loss in the fourth quarter. Passenger revenue last month was down about 30 percent from the previous October, and it said it was losing about $15 million cash per day.

"United, along with the rest of the airline industry, has been struggling with a weak economy and was dealt a difficult and painful blow by the Sept. 11 terrorist attacks and their impact on air travel," said John Creighton, the newly named chairman and chief executive. "Our results this quarter reflect the sharp falloff in both business and leisure travel that has occurred, and we anticipate continued weakness in both of these sectors into next year."

United recently announced layoffs of about 20,000 employees and the biggest schedule cuts in its history — reducing its daily schedule by about 30 percent from pre-Sept. 11, to about 1,650 flights. The new CEO, who is directing a difficult new round of labor talks, indicated more measures are coming.

"Some tough compromises will be required from all of us in the short run," said Creighton, who took over on Sunday after James Goodwin resigned under pressure.

Goodwin had warned in a letter to employees that the company is burning through cash so fast it could "perish" next year without substantial improvements.

The company said in the earnings report it had $2.7 billion cash as of Sept. 30.