Doesn´t look all good, huh?


quote:

"UAL Corporation Reports Third-Quarter Results


October 28, 2004


Third-Quarter Operating Loss of $80 Million
Fuel Expense $291 Million Higher Than Third-Quarter 2003

Record-High Fuel Costs, Industry Excess Capacity and Soft Yields Necessitate

Fundamental Change and Further Cost Reductions

CHICAGO, October 28, 2004 – UAL Corporation (OTCBB: UALAQ.OB), the holding company whose primary subsidiary is United Airlines, today reported its third-quarter 2004 financial results.

UAL reported a third-quarter operating loss of $80 million, which compares with a $19 million operating profit in the third quarter of 2003. UAL reported a net loss of $274 million, or a loss per basic share of $2.38, which includes $97 million in special and reorganization items described in the notes to the financial tables. Excluding the $97 million in special and reorganization items, UAL’s net loss for the third quarter totaled $177 million, or a loss per basic share of $1.55.

“A systemic change is underway in the airline industry. Excess capacity has led to the lowest fares in more than a decade,” said Glenn Tilton, chairman, president and chief executive officer. “This new environment, coupled with record fuel costs, means we have more work to do if we are to be successful. And we will be. With our unmatched global route network, and our people, who continue to deliver excellent customer service, no one is better positioned in this industry than United to be sustainable, profitable and competitive for the long term.”

United continued work on its ongoing strategy

In the third quarter, United continued work on its ongoing strategy to reduce costs, leverage the product portfolio and network, deliver operational excellence and focus on customer service and investment in products. Specifically, United:

Successfully negotiated the expansion of its debtor-in-possession financing to $1 billion on favorable terms and extended the repayment schedule through June 2005, demonstrating that major financial institutions support the company’s long-term prospects.
Substantially accelerated the company’s plan to optimize its worldwide network by expanding its international leadership, redeploying aircraft to more profitable routes and reducing the overall size of its mainline fleet;
Leveraged United’s core competencies to improve revenue from sources other than commercial flights, including United Services’ maintenance, repair and overhaul services and United Cargo freight revenue;
Agreed with certain large holders of Chicago municipal bonds to a settlement, which in effect, reduced United’s indebtedness from about $600 million to $150 million. This settlement results in savings of approximately $450 million for United.
Continued to deliver outstanding operational performance for the third quarter 2004. Seventy percent of United flights departed exactly on time during the quarter, two percentage points better than the goal set by the company for its new employee incentive program.
“United’s financial performance, like the rest of the industry, was severely affected by low yields and the soaring cost of fuel during one of the traditionally most profitable periods. During the third quarter, the company burned through almost $1 million per day on an operating basis,” said Jake Brace, United’s executive vice president and chief financial officer. “Even though our unit revenue performance was on par with our peers, the pricing environment prohibits us from recouping high fuel costs. Given the urgency of United’s situation and the stark financial reality in the entire industry, United believes that it will have no choice but to seek significant additional labor savings beyond terminating and replacing our pension plans.”

Notwithstanding the $5 billion in annualized cost reductions the company will have in place by 2005, United previously announced that it had targeted more than $1 billion in additional cost savings over and above any savings that United might realize through the potential termination and replacement of its pension plans. UAL expects to substantially update its business plan based on feedback from the capital markets, the creditor’s committee and other stakeholders.

Financial Results

UAL’s third-quarter 2004 operating revenues were $4.3 billion, up 7% compared to third quarter 2003. Load factor increased 1.9 points to 82.1% as traffic increased 11% on an 8% increase in capacity. During the third quarter, passenger unit revenue was 3% lower on a 5% yield decrease.

Largely driven by the 8% increase in capacity, total operating expenses for the quarter were $4.4 billion, up 10% from the year-ago quarter. Mainline operating expenses per available seat mile increased 1% from the third quarter 2003. Excluding fuel, mainline operating expenses per available seat mile decreased 7%. Productivity (available seat miles divided by employee equivalents) was up 9% for the quarter year-over-year. Fuel expense was $291 million higher than in the third quarter 2003. Average fuel price for the quarter was $1.30 per gallon (including taxes), up 44% year-over-year.

The company ended the quarter with an unrestricted cash balance of $1.5 billion and an additional restricted cash balance of $857 million. During the quarter the company made a quarterly retroactive wage payment to International Association of Machinists members of $63 million and a quarterly Success Sharing reward to employees of $26 million. In addition, non-aircraft capital expenditures totaled $79 million and principal debt repayments totaled $136 million. During September, the company accessed $503 million from the expanded debtor-in-possession financing.

The company had an effective tax rate of zero for the third quarter, which makes UAL's pre-tax loss the same as its net loss.

Outlook

We expect fourth-quarter system mainline capacity to be up about 3% year-over-year. Mainline capacity for 2005 is expected to be about 3% lower than 2004. The company expects fuel price, including taxes, for the fourth quarter to average $1.45 per gallon. As a result, fuel expense for the year is expected to be $1.2 billion higher than planned. The company has 36% of its expected fuel consumption for the fourth quarter hedged between $1 and $1.17 per gallon, excluding taxes.

September Monthly Operating Report

UAL today also filed with the United States Bankruptcy Court its Monthly Operating Report for September. The company posted a $118 million operating loss for September and met its DIP covenants for the month. We are currently in compliance with the terms of the Club Facility; however, we now believe that, due to record high fuel prices coupled with continued weakness in the revenue environment, there is a strong possibility that we will not be able to comply with the Club Facility’s EBITDAR covenant in the fourth quarter. Under the current terms of the Club Facility, failure to comply with the EBITDAR covenant would constitute a default of the Club Facility. We are currently in discussions with the Club Facility lenders regarding this situation.

News releases and other information about United Airlines can be found at the company’s website, www.united.com.

The Notes attached to the Statement of Consolidated Operations show a reconciliation of the reported net income to the net loss excluding special charges, as well as a reconciliation of other financial measures, including and excluding special charges."