Tue, Apr 22, 2008
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.
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