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. Last Updated: 07/27/2016

UAL Reports $1.47Bln Q4 Loss

NEW YORK -- The UAL Corp., the parent company of United Airlines, reported Friday a net loss of $1.47 billion in the fourth quarter, capping off the most horrendous year in the airline's history.

Never before had the airline lost $3.2 billion in a single year. Never before had it been forced to file for bankruptcy protection from its creditors, which it did on Dec. 9.

The company's fourth-quarter loss was nearly five times as large as its loss of $308 million in the fourth quarter of 2001, when the airline was still struggling to recover from the immediate impact of the Sept. 11 terrorist attacks.

Its loss at the end of 2002 amounted to $20.70 per share, while its loss in the comparable period in 2001 was $5.68 per share.

UAL reported a net loss of $2.1 billion in 2001, which at the time was the worst-ever in the industry.

At least United can no longer lay claim to that dubious superlative. Last week, the AMR Corp., the parent company of American Airlines, reported a loss last year of $3.51 billion.

United recorded several special charges in the fourth quarter, including $67 million for severance pay related to employee layoffs and $10 million for mostly professional fees related to its bankruptcy filing. The company also said it would have to reduce its net worth by $2.4 billion because of its significant pension liability, a problem that many U.S. companies are struggling to cope with.

Revenue rose 17.6 percent in the fourth quarter, to $3.5 billion, from $2.9 billion a year earlier.

Shares of UAL declined 5 cents Friday to $1.03.

United said it ended the quarter with $1.9 billion in cash, after receiving $700 million of the $1.5 billion debtor-in-possession financing that it lined up the day before filing for Chapter 11 bankruptcy.

"The biggest single challenge United faced in 2002 was to reduce its costs, the highest in the industry, as the essential underpinning of becoming a competitive, sustainable airline," Glenn Tilton, the oilman-turned-United chief executive, said in a statement.

But Tilton acknowledged that United's cost-cutting initiatives "were simply not sufficient to address United's immediate and long-term issues."

In recent weeks, Tilton and fellow executives have been scrambling to put together a bankruptcy reorganization plan. That was presented to the UAL board Thursday. It laid out details of a proposed low-cost carrier that would compete head-to-head with carriers like Frontier Airlines, which is winning market share at United's Denver hub.

But starting a new carrier has drawn more than its share of skeptics.

"I'm not a big fan of all these carriers trying this low-fare stuff," said Susan Donofrio, an airline industry analyst at Deutsche Bank. "I hope they focus on their bread-and-butter business."

Donofrio said the reorganization plan needed to have significant wage concessions, even though those could prove tough for United executives to get out of the company's unions.

Executives have been asking United's five labor groups to give up $2.4 billion per year over five years. But those talks appear to be jeopardized by United's plans to start a low-cost carrier.

On Wednesday, the pilots' and flight attendants' unions lashed out strongly at what they called a proposal by the company to operate the low-cost carrier as a completely separate company, with different pay scales and seniority lists.

"Sharp cost-cutting, that's the key," said Raymond Neidl, an analyst at Blaylock & Partners.

"But you need to do it in a way where you don't completely alienate the workers. It's fine tightrope you have to walk."