Following the longest bankruptcy in aviation history, United Airlines today is exiting Chapter 11 protection a leaner carrier, yet still facing the steep competition and costs that plague U.S.-based airlines.
While 2005 was another year in the red, United, like competitors American and Continental airlines
(BTNonline, Jan. 18), improved financially from previous years, its parent UAL Corp. said upon releasing earnings last week. The carrier for the full year reported a net loss of $21 billion—$17 billion alone in the fourth quarter—but barring reorganization expenses, the carrier would have neared a break-even year. UAL said it "outperformed the industry in revenue improvement."
"We have made fundamental, sustainable changes to United's business and established a solid financial platform," said Glenn Tilton, United's chairman, CEO and president. "Moving forward, our focus is on our customers and continuous improvement in everything we do to drive increased margins and renew profitability. Although operating earnings for both the fourth quarter and the full year 2005 have improved significantly—despite an increase in system fuel price of over 40 percent—we know we can do better. We will continue to contain costs, apply sound revenue management and deliver consistent service to our customers."
Like its competitors, United continues to face high fuel expenses, which may prohibit the carrier from finishing 2006 in the black. The carrier last week said it expected to spend $4.3 billion in fuel this year, nearly $1 billion higher than initially anticipated.
Yet, United—like many other carriers—has spent the previous years rethinking strategy, cutting costs and generating revenue
(BTN, Jan. 23). In addition to total revenue jumping 6 percent last year amid higher capacities and fares, the company said it also expected various cost-reduction initiatives to yield $7 billion in savings annually by 2010. The carrier this week announced further cost-cutting strategies via "a resource optimization program enabling it to more efficiently use its gates and deliver the equivalent of 10 additional aircraft using existing resources."
The carrier said it would tighten aircraft turns, depeak operations at hubs—much like it did last year in Los Angeles—and optimize block time to improve connections and on-time performance. "For customers, this will mean more frequencies, new destinations and even better connection possibilities," said Pete McDonald, executive vice president and COO.
Meanwhile, JetBlue today announced a 2005 net loss of $20.3 million, attributing its woes to spikes in fuel expenses that offset increases in passenger revenue and a jump in capacity. As such, JetBlue did not match profits posted this month by low-fare carriers AirTran and Southwest.