UPDATE 2-United Airlines parent loss smaller than expected

Tue Oct 20, 2009 10:14am EDT

* Q3 loss 43 cents/shr vs loss estimate 94 cts

* Q3 revenue down 20 percent

* Sees mainline unit costs, ex-fuel down 0.5 pct in 2009

* Shares up 9 percent (Recasts. Adds details, CEO quote, analyst quote, background. Updates shares.)

By Kyle Peterson

CHICAGO, Oct 20 (Reuters) - United Airlines parent UAL Corp UAUA.O posted a loss that was half of what Wall Street expected, helped by lower costs and easing revenue pressures amd sending shares up 9 percent on Tuesday.

The company sees improving revenue trends and an increase in travel demand, which suffered during the recession.

"We are poised to see better year-over-year unit revenue performance as economies begin to recover and business travel returns," said UAL Chief Executive Glenn Tilton in a statement.

Its third-quarter net loss narrowed to $57 million, or 39 cents per share, from $792 million, or $6.22 per share, a year earlier.

Excluding hedging gains and certain accounting charges, UAL posted a loss of 43 cents per share. On that basis, analysts expected a loss of 94 cents, according to Thomson Reuters I/B/E/S.

The carrier posted $131 million in losses on fuel hedges that settled in the quarter and gains on its fuel hedges of $59 million.

Operating revenue fell 20 percent to $4.43 billion.

For the third quarter, consolidated passenger unit revenue declined 14.7 percent, an improvement of 2.5 percentage points over the second quarter of 2009.

Mainline unit costs for the quarter fell 1.6 percent year-over-year, excluding fuel and certain accounting charges. UAL expects mainline unit costs, excluding fuel, profit sharing and certain accounting charges, to fall 0.5 percent for 2009.

"They're still doing a tremendous job of cutting costs," said Morningstar equity analyst Basili Alukos.

UAL ended the quarter with total cash amounting to $2.8 billion, unrestricted cash of more than $2.5 billion, and restricted cash of $309 million.

The company said last month that it expected to be in full compliance with its credit facility covenants in the third quarter and that it planned new liquidity initiatives in the fourth quarter.

UAL completed financings amounting to more than $1.5 billion in the third quarter and early fourth quarter. The efforts raised about $1 billion in new liquidity.

Cargo revenue slipped 43 percent for the quarter on lower volumes and pressure on yields in the weak economy. The company said its large presence in hard-hit Pacific export markets continues to "disproportionately affect" its cargo revenue.

Shares of UAL rose to $7.93 in early trading on Nasdaq, up 9 percent from Monday's close. (Reporting by Kyle Peterson; Editing by Lisa Von Ahn and Derek Caney)

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