UAL posts quarterly loss as fuel costs jump

By Kyle Peterson

CHICAGO (Reuters) - UAL Corp, parent of No. 2 U.S. carrier United Airlines, reported a quarterly loss on Tuesday, caused by skyrocketing fuel costs and economic weakness in the industry.

The loss was narrower than a year ago, when the company was badly hurt by winter storms, and it beat Wall Street's forecast. UAL's revenue rose almost 13 percent, helped by a one-time gain from its mileage program.

UAL shares were down 3.95 in afternoon trading on Nasdaq amid broader market turmoil and growing fears of a recession in the United States.

The airline's results underscore the industry's fight against record high fuel prices, but also reflect the advantages restraining supply to boost revenue.

"I think the thing that stands out the most is the amazing PRASM (passenger revenue per available seat mile) increase," said Ray Neidl, an analyst at Calyon Securities. "They looked like they were in a little bit stronger position than we though they would be."

The airline industry hopes to build on a recovery that began in 2006 when carriers began cutting capacity -- the number of seats -- for sale on domestic routes and moving them to more profitable international routes.

UAL's loss follows one posted last week by its chief rival AMR Corp, parent of American Airlines, which saw a fourth-quarter loss on high fuel costs.

The industry has been walloped by the expense, as well as by prospects for softening demand amid a flagging U.S. economy. The U.S. Federal Reserve slashed the benchmark federal funds target rate by 75 basis points on Tuesday in a surprising move to shore up the economy.

UAL is at the center of speculation that the industry will consolidate to cut capacity and costs. The carrier reportedly is in merger talks with Delta Air Lines Inc. UAL has not confirmed the speculation, however.

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The company said its fourth-quarter loss amounted to $53 million, or 47 cents per share, compared with a loss of $61 million, or 55 cents per share, a year earlier.

Analysts had expected the company to lose 96 cents per share, according to Reuters Estimates.

The carrier said quarterly revenue was $5.03 billion, a 9.7 percent increase over the same period a year ago.

"We have been extremely disciplined -- and will continue to be disciplined -- in our capacity planning, aggressively managing our assets so that they produce the best possible return for us," UAL Chief Executive Glenn Tilton said in a message to employees.

While UAL and its rival airlines struggle to continue to recover after a years-long downturn, record-high fuel prices and a softening U.S. economy have jeopardized that recovery.