High fuel costs drain United’s coffers
CHICAGO — United Airlines said in a bankruptcy court filing Thursday that it posted a net loss of $93 million in May — its efforts to return to profitability complicated by near-record jet fuel costs.
The nation’s No. 2 carrier, which is seeking an additional $500 million in financing after trimming its request for federal assistance, pointed to a $9 million operating profit for the month as evidence its restructuring work is paying off.
“Our cost-reduction and revenue-generation efforts are delivering results and making United a stronger, more competitive airline as we continue to move forward,” chief financial officer Jake Brace said.
But CEO Glenn Tilton cautioned employees in a separate message that more cuts will be needed to cope with increased competitive pressures and soaring fuel expenditures, reiterating that United will have to “dig deeper” on costs.
“We are going to have to maintain a relentless focus on cost improvement,” Tilton said on a company hot line Wednesday evening, without specifically mentioning further concessions by workers. “United has to continue to meet the demands of a competitive marketplace, and cost reduction is going to continue to be a major part of everything that we do.”
May results included a 7 percent increase in passenger revenue from the same month a year earlier and represented an improvement of $164 million over May 2003 operating costs. They also included $58 million in reorganization expenses, such as breaking aircraft leases as part of a fleet overhaul, United said.
Tilton confirmed the company asked the Air Transportation Stabilization Board on Tuesday to guarantee $1.1 billion of its $2 billion in conditional bank loans — down from $1.6 billion previously and $1.8 billion in 2002. He did not indicate when United expects to hear from the federal panel on its third and presumably last bid to take advantage of the loan guarantee program.
He said employees’ efforts have given the company a “strong and solid foundation upon which to build,” citing United planes that are flying with an average of 90 percent of seats filled plus “terrific” summer bookings.
Employees have made $2.5 billion in annual concessions since United filed for Chapter 11 bankruptcy in December 2002, providing about half the company’s estimated $5 billion in lowered expenses. Many fear their pensions will be targeted by any outside investor, particularly with United facing billions of dollars in pension obligations in coming years.
Meanwhile, Treasury Department investigators will look into whether any inappropriate political pressure was applied to the federal board.
Sen. Peter Fitzgerald, R-Ill., has asked the department’s inspector general to investigate whether board member Brian Roseboro, who voted against United’s request last week, was pressured to change his vote. Roseboro is an undersecretary at Treasury and the department’s representative on the board.
Richard Delmar, counsel in Treasury’s Office of Inspector General, told The Associated Press on Thursday that the office will conduct an examination into the matter.
“We are going to open a preliminary inquiry on the senator’s questions,” Delmar said. The office will be interviewing people and gathering information to assess whether anything improper occurred.