Worst Showing Since Chapter 11 Exit

Few companies are able to survive losing $537 million over a three-month period, especially if that trend continues. That's the problem now facing UAL Corp., parent company of United Airlines.

UAL announced the staggering first quarter loss Tuesday... blaming the hemorrhaging of cash on record fuel prices, according to The Chicago Tribune. The loss was by far United's worst fiscal showing since the carrier clawed out of Chapter 11 bankruptcy in 2006, and is so far the poorest Q1 2008 showing among all domestic airlines.

The airline says it managed to record nearly 8 percent revenue growth in the same period... but that the added cash taken in through higher ticket prices and new luggage charges was far eclipsed by a $618 million jump in fuel costs.

"Although both our revenue performance and our non-fuel cost performance were good this quarter, they were not enough to offset the significant and rapid rise in fuel prices," said United CEO Glenn Tilton to employees.

The Chicago-based airline plans to take drastic measures in order to survive. United says it will cut its planned spending for the year by $400 million, and will also eliminate 500 salaried positions -- including management-level jobs -- and another 600 union workers by the end of 2008. The carrier will also further slash capacity, grounding another 10 to 15 narrowbody planes by the end of the year.

"The path to sustainable profitability requires us to fundamentally overhaul every facet of our business," Tilton said... including the possibility of a merger with another airline, calling consolidation "one of the changes required to address the gap between where we stand today and profitability and sustainability."

Of course, Tilton has been an advocate of such action in the past... and many insiders believe United is currently in serious talks with Continental Airlines to form a mega-airline to rival the proposed joining of Delta and Northwest.

FMI: www.united.com