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United Airlines posts large loss

UAL Corp reported a US$1.1 billion first-quarter loss, its biggest in two years, as it embarked on a high-stakes bid to further cut costs by rewriting two unions' contracts.

The loss was announced on Wednesday, a day after a federal bankruptcy judge approved United Airlines' plan to end employee pension plans, clearing the way for the largest corporate-pension default in US history.

The company has now lost US$5.8 billion since entering bankruptcy in December 2002.

The first-quarter results were released shortly before the start of what is certain to be a contentious trial in federal bankruptcy court over United's proposal to unilaterally impose new lower-cost contracts on its mechanics' and machinists' unions. Negotiations have so far failed to produce agreements, and both unions' memberships have authorized strikes if the contracts are broken without their consent.

United said it had a US$250 million operating loss for the first three months of this year due mostly to US$202 million in additional fuel expenses than a year earlier. That compared with a US$211 million operating loss in the first quarter of last year.

The net loss of US$1.1 billion, or US$9.23 per share, included two huge restructuring costs: US$433 million related to the termination of ground workers' pensions and US$294 million for rejected aircraft leases. That compared with a loss of US$459 million, or US$4.17 per share, a year earlier.

Revenue was virtually unchanged from a year ago at US$3.9 billion.

CEO Glenn Tilton said the results showed progress on cost-cutting despite the latest loss in a tough industry environment.

"Progress to reduce costs throughout the system has been substantial and we are pressing ahead to further reduce costs and inefficiencies in all areas of the business," he said.

Angry labor unions continued to warn of possible strikes, although they said they were not taking any immediate actions pending the outcome of talks or bankruptcy court actions involving their contracts.

The International Association of Machinists and Aerospace Workers announced its members had voted by a 94 percent majority this month to authorize a strike if United succeeds in unilaterally imposing new contract terms, as the airline was attempting to do in a potentially lengthy court process that began on Wednesday afternoon.

Strike threats, while rarely carried out, are particularly powerful bargaining weapons in the airline industry since they can put carriers out of business if employees walk for any length of time. Even the hint of a strike can be costly to an airline in terms of lost bookings.

United, a unit of Elk Grove Village, Illinois-based UAL, has contracts in place with its pilots and flight attendants through 2010 but has been unable to negotiate agreements on long-term pacts with the mechanics' and machinists' unions.

Top IAM executive Randy Canale expressed optimism that the union and United will reach agreement in the next few days on a contract that members would ratify, even though formal negotiations aren't set to resume until next week.

"We're still communicating and we're in discussions even while the trial is under way," Canale said in an interview outside the courtroom.

United also held daylong negotiations on Wednesday with the Aircraft Mechanics Fraternal Association, which presented a new offer to United management, AMFA spokesman Richard Turk said.
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