United Airlines bleeds cash at the rate of $15m a day

Click to follow
The Independent Online

The fall-out from the 11 September terror attacks in the US has hit United Airlines hard after it revealed a $1.16bn (£795m) loss in the third quarter of the year, including special charges.

It was the worst performance ever posted by the US carrier – the world's second largest – in its 75-year history.

The figures were in line with Wall Street forecasts and confirmed the stark circumstances that United Airlines, a unit of UAL Corp, now finds itself in. Passenger revenue during October was down 30 per cent over the same month last year, causing the carrier to lose roughly $15m every 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 11 September terrorist attacks and their impact on air travel," said John Creighton, UAL's newly appointed chairman and chief executive.

The airline, which lost two aircraft in the kamikaze attacks on the World Trade Centre and the Pentagon, said that it was seeing a "substantially greater" operating loss since the end of the quarter. "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," Mr Creighton said.

Mr Creighton was drafted in to head United Airlines last weekend after the board forced out his predecessor, James Goodwin. Mr Goodwin precipitated a slide in the value of UAL shares after saying in a letter to employees two weeks ago that the carrier may "perish" next year if it did not stop losing money.

The loss of $1.16bn includes special charges of $865m related to the loss of its two aircraft was well as layoffs and severance payments. It also reflects a special infusion of $391m in cash support from the federal government, extended as part of a general bail-out to the aviation sector. With those elements taken out, the operating loss for the quarter stood at $542m or $10.05 a share.

Already United, which is a co-founder of the Star Alliance grouping of airlines, has taken dramatic steps to curb its losses. It has shed 20,000 employees and cut its domestic flight schedule by about 30 per cent. More sacrifices are coming, however, Mr Creighton warned. "Some tough compromises will be required from all of us in the short run," he said.

Delta Air Lines, meanwhile, revealed a $259m third-quarter loss that was eased by federal assistance and was markedly better than Wall Street had been expecting.

Comments