Machinists Sue UAL Over Pension Payments

UAL yesterday announced a second-quarter loss of $247 million ($2.25 a share), compared with a loss of $623 million ($6.26 a share) for the same period a year ago. Yesterday's reported losses included $144 million in reorganization charges. United has been operating under Chapter 11 since December 2002.

A survey of airline analysts by Thomson First Call estimated that UAL would lose about $1.66 a share.

The nation's second-largest airline was able to eke out a small profit from operations during the quarter -- $7 million, compared with a loss of $431 million in the second quarter of 2003.

United's fuel prices increased more than 53 percent from the second quarter last year. Aircraft maintenance expenses increased nearly 70 percent because of increased outsourcing.

And while the airline filled 82 percent of its seats for the period, the yield -- or revenue from passengers for those seats -- increased only 3 percent.

United, based in Elk Grove Village, Ill., said it had about $1.4 billion in available cash. The airline said it has to maintain healthy cash levels to attract post-bankruptcy financing, especially as it heads into the slower travel period this winter. The airline owes more than $500 million in pension contributions this year and $4 billion over the next five years.

William T. Warlick, senior airline debt analyst for Fitch Ratings, said the only way United can maintain its cash levels is to terminate one or more of its four employee pension plans.

"They're going to have to find some way to terminate these plans," Warlick said. "There's clearly a need to conserve cash in any way possible."

Tilton said the airline had more work to do to attract the money it needs to help it emerge from Chapter 11. Analysts have estimated the airline needs about $2 billion in exit financing.

"It is clear that we must continue to reduce our overall cost structure if United is to be competitive and achieve sustainable profitability," Tilton said.