UAL Posts Huge Loss, Refuses To Rule Out Bankruptcy

United Airlines parent UAL Corp. today reported a $308 million fourth-quarter loss and a full-year loss of $2.1 billion. Senior vice president and CFO Jake Brace, repeatedly pressed by analysts during a conference call about a possible bankruptcy filing, only said the company is working toward financial recovery. He did not definitely rule out a Chapter 11 reorganization nor indicate a filing was forthcoming.

"We are going to need some sort of financing piece, but we have not decided if that will be through a federal loan guarantee or not," Brace added. "Fortunately, we have significant assets and significant liquidity which gives us time to get our cost structure right." UAL ended the year with $2.6 billion in available cash, despite a daily cash burn rate of $10 million in the fourth quarter.

Other fourth-quarter results included passenger unit revenues down 24 percent, load factor down 3 points and passenger yield off 20 percent. "Our business mix is holding up well, but when you look at the yield, corporate travelers are finding really low fares, which is our real problem," said president Rono Dutta, citing a 20 percent reduction in fourth-quarter business travel yields. The carrier again pointed to its higher-than-average domestic business traffic mix, which has left it more vulnerable than competitors.

Dutta said the airline "has lost some and gained some" corporate accounts but hasn't lost any major clients in its Chicago hub.

Moving forward, the company expects January unit revenues to stay down by as much as 17 percent and first-quarter capacity to be off by 19 percent. UAL is forecasting a "significant" first-quarter loss, and Brace would not predict a timeframe for reachieving profitability. United also announced it will restore 127 mainline daily flights in its April schedule as it slowly builds back capacity.

Meanwhile, the carrier's machinists in less than two weeks will vote on a new contract proposed by a presidential emergency board. United management accepted the proposal, which calls for a 37 percent pay increase with labor concessions to help the company cut costs. "We are talking to the unions about adjusting salary levels because the salary levels we have out there now were set in a different time in a different revenue environment," Brace explained. "I think everyone understands that reality."