updated 5/8/2006 2:30:33 PM ET 2006-05-08T18:30:33

United Airlines parent UAL Corp. reported a wider first-quarter loss Monday despite the completion of its 38-month bankruptcy overhaul, blaming the shortfall on record fuel prices, stock-based compensation expense and a change in accounting methods.

Company executives, while “encouraged” by strong revenue improvements, said United’s costs remain too high. They pledged to cut $400 million by next year by streamlining functions, spending less on advertising and eliminating an unspecified number of salaried and management jobs.

The parent of the nation’s No. 2 carrier officially reported a $22.9 billion on-paper profit for the quarter, but that total was misleading. The figure reflected the reversal of on-paper losses recorded for all of last year, when unsecured claims that would ultimately be settled for a fraction of the charges resulted in a $21 billion loss for 2005.

The more representative figure, the company said, was a loss of $306 million before reorganization items versus a loss of $302 million incurred during the first quarter a year ago.

United did not provide a per-share figure, citing the switch to a new accounting basis during the quarter, although Chief Financial Officer Jake Brace said results were “clearly worse” than analysts expected.

Revenue rose 14 percent to $4.47 billion from $3.92 billion last year, benefiting from increased capacity, slightly fuller planes and six domestic fare increases that United successfully initiated during the quarter.

Record fuel costs continued to weigh on the company’s bottom line, as with other carriers, costing United $314 million more than in the first quarter a year ago. Results also were hurt by the recognition of $69 million for stock-based compensation expense and by new accounting policies, which remeasured the value of the company’s assets and liabilities and reduced net earnings by about $160 million.

United’s first-quarter operating loss was $171 million, a $79 million improvement over the same quarter last year.

“The company today is on solid financial footing,” Chairman and CEO Glenn Tilton said on a conference call. “That said, our controllable costs for the quarter do not yet reflect United operating at our most efficient level.”

In a separate communique to employees, he said the company will be taking “a very hard look at everything that we do. We’ll be reducing overhead spending for general and administrative and back office across United by streamlining functions, improving processes and eliminating unnecessary work.”

Analyst Ray Neidl, who follows airlines for Calyon Securities, called the results disappointing.

“The cost structure remains too high,” he said. “They said they’re working on that but they’ve got a lot of work to do.”

The targeted $400 million in savings is a start, he said, but “it has to be achievable and it probably is something that would only be a first step.”

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