But In The Wacky World Of Business, That's Not ALL Bad...
UAL Corp., parent
company for United Airlines, reported a record $1.77 billion loss
Monday for the third quarter of FY2005. Most of those losses stem
from the heavy toll reworking its airplane contracts and leases has
taken on the beleaguered carrier, including creditor's claims on
its aircraft following the company's rejection of leases and
contracts in an attempt to secure lower prices.
However, things may not be as dire as that number might make it
seem: while the latest loss puts United's overall losses from
nearly three years of bankruptcy protection at $9 billion, the
carrier also posted a $165 million operating profit for the
quarter. Take away that $1.8 billion in restructuring costs, said
the carrier, and UAL would have posted a net profit of $68
million.
United executives point to the figure as a sign the carrier is
on target to emerge from Chapter 11 early next year, according to
the Associated Press.
"We have largely completed United's restructuring work and we
are on schedule to emerge from Chapter 11 in early February as we
have announced," CEO Glenn Tilton told employees in a recorded
message.
That may be the case, but it's also difficult to overlook it was
the company's 21st consecutive quarter in the red. The loss also
topped the previous record of $1.47 billion for Q4 of 2002, when
the carrier first filed for bankruptcy protection.
The company is also optimistic claims against the company, which
are still being settled, will ultimately result in the carrier only
having to pay a fraction of the original amounts. Once those claims
are settled, United CFO Jake Brace said, the company expects to
report a large on-paper gain offsetting those losses.
"This is very normal for bankruptcies ... (and) has nothing to
do with the operation of the business at all," Brace said. "The
industry still has a number of challenges, fuel costs chief among
them, but we're pleased with our results."
Many financial analysts echo those sentiments, saying despite
mounting losses the carrier is performing well. Several lenders
have also endorsed United's progress, and stuck with the company
through its losses. As Aero-News reported last month, JPMorgan
Chase Bank and Citigroup Inc. are the lead financiers on a $3
billion debt package that United signed off on Oct. 6, ensuring its
successful emergence from bankruptcy.
"That's just so many financial barnacles to stick onto a
bankrupt company," said airline consultant and Boyd Group president
Michael Boyd. "They're going to get scraped off."
"It's a good performance, frankly," Boyd continued. "I
think it clearly shows going forward that they can pull this
off."
While the carrier is forecasting a true profit next year for the
first time in five years, the goal is based on a business plan
envisioning the cost of fuel to remain close to $50 per barrel --
which is $10 below current prices. United said it spent $405
million more on fuel this year, compared to Q3 of 2004.