United Airlines, on Friday said it lost a jaw-dropping $17 billion in the fourth quarter on reorganization expenses and skyrocketing fuel prices.
The number 2 U.S. airline, which is set to emerge from bankruptcy next month, said that they lost US$17 billion, from expenses related to reorganization items. They are expected to be settled when the company exits bankruptcy for a small fraction of the amount, the company said.
"The $17 billion (loss) is meaningless because it involves all sorts of accounting issues," said airline consultant Michael Boyd.
The airline, which has been in bankruptcy since December 2002, has been hurt along with other major airlines by high fuel costs and overcapacity. Some carriers have seen renewed stability lately as excess capacity comes out of the market.
Excluding the charge, UAL said its operating loss was $182 million compared with $570 million in the same quarter last year. Total revenue for UAL increased by 10 percent, to $4.4 billion.
"These results set us on track for the year ahead," UAL's Chief Executive Glenn Tilton said in a recorded message to employees. "We will push forward and build on this momentum, knowing there is much to be gained simply in improving our execution."
The carrier ended the quarter with an unrestricted cash balance of $1.8 billion and a restricted cash balance of $957 million for a total cash balance of $2.7 billion.
The airline forecast its fuel price would average $1.92 per gallon in the first quarter. For all of 2006, UAL said it anticipates fuel expenses would increase by about $885 million over its previous assumption, which was based on a fuel price of $1.48 per gallon.
UAL has taken criticism in the last few months because of a fuel forecast that many experts say is overly optimistic. The carrier said in its reorganization plan, approved by a bankruptcy court, that it expects the price of oil to average $50 a barrel over the next five years. NYMEX oil futures were trading above $67 a barrel on Friday.
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On news related to the airline, United released news that will make customers on the east coast near Washington DC very excited.
United Airlines has a deal with defunct Independence Air to take over the 35 gates that Independence leased in Washington Dulles International Airport's Concourse A, which is used for short commuter flights.
The $4.3 million agreement with Independence Air would further United's planned expansion in the Washington market, enabling the Elk Grove Township, Ill.-based carrier to feed more passengers from commuter flights onto longer-haul West Coast and international flights. The deal is subject to approval by the U.S. Bankruptcy Court in Delaware.
UAL Corp. Chairman Glenn F. Tilton said this week that he plans to make United's East Coast hub at Dulles a major gateway to Europe, Latin America and South Africa. United also is lining up partners: It recently signed a code-sharing agreement with South African Airways, which operates a one-stop flight from Dulles to Johannesburg.
The acquisition of the Concourse A gates could make life easier for United's short-hop passengers. Now many must take a mobile lounge vehicle, then a bus, to reach United's regional jet terminal in Concourse G. Passengers headed to Concourse A can walk or take a mobile lounge.
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