Fuel Hedge Losses Take Big Bite Out Of $5.57 Billion In Revenues

There's losing money... and then there's hemorrhaging cash. United Airlines took another giant step towards the latter Tuesday, reporting a third-quarter loss of $779 million due to hits incurred from the carrier's fuel hedging program.

The loss comes out to a $6.13 per-share hit for United stockholders, despite increasing revenue for the airline. But even $5.57 billion in cash taken in couldn't offset the hit United took on its hedged fuel supplies, which are considerably weaker now that oil prices have plummeted from their high of $147 per barrel this summer.

"While today's weak economic environment challenges our industry as demand softens, that same economic environment has caused oil prices to significantly decline from the unprecedented highs we witnessed earlier this year, suggesting significantly lower industry costs and improving operating margin," said Glenn Tilton, United chairman, president and CEO. "We are taking the action required to return to profitability and continue to strengthen our liquidity while simultaneously improving the operating fundamentals to deliver the results our shareholders and customers expect."

Without the $519 million in non-cash fuel hedge losses, United "only" lost about $1.99 per share... which was actually better than many analysts had predicted.

In happier news for the struggling airline, United noted it received approximately $1.4 billion through various transactions it closed during the quarter, including approximately $1 billion through a revised financing agreement with credit card service providers Chase Bank USA and Paymentech LCC. "The agreements with Chase and Paymentech will improve United's liquidity by an additional $200 million over the next two years," according to the airline.

"We are ensuring that United is well positioned in this difficult market: we have minimal capital obligations and we have been able to raise $1.4 billion, including a $125 million financing closed just a few weeks ago in a very tough credit market," said Kathryn Mikells, United's incoming CFO. "We continue the work to further enhance liquidity and our $3.0 billion in unencumbered assets provide us with critical financial and operational flexibility."

Which goes to show... in today's torturous, bailout-fueled economic environment, every failure can be spun as a positive.

FMI: www.united.com