updated 7/24/2006 12:04:38 PM ET 2006-07-24T16:04:38

United Airlines parent UAL Corp. said Monday it expects to report a better-than-expected $119 million in net earnings for its first full quarter out of bankruptcy, marking its first profit since 2000.

Higher fares and packed planes helped the company post double-digit operating revenue growth in the second quarter, and cost controls improved the bottom line.

It will be UAL’s first profit since it reported earnings of $408 million in the second quarter of 2000, which also was its last profitable year before the industry’s highest costs, management missteps and the 2001 terrorist attacks forced it into bankruptcy protection.

The Elk Grove Village-based company emerged from bankruptcy protection Feb. 1 after 38 months of restructuring. Despite soaring fuel prices and some observers’ concerns that its cost structure remains too high, it has benefited like other airline companies from a series of fare increases imposed this year without driving customers away.

While a landmark for United, the profit is not impressive compared with those of other carriers that have reported second-quarter results. Continental Airlines Inc., AMR Corp. — the parent company of American Airlines — and Southwest Airlines Co. all reported higher profits last week.

“Obviously it represents a significant improvement,” said Philip Baggaley, airline analyst for Standard & Poor’s Corp. “The earnings are not quite as strong as those reported by AMR or Continental (but) they point out a number of items that they characterize as unusual or nonrecurring.”

The company reports full second-quarter earnings July 31.

UAL estimated net income at $119 million, or 93 cents per share for the three months ended June 30 versus a loss of $26 million excluding reorganization and special items.

Excluding a severance charge of $22 million, earnings are expected to be $141 million.

“We expect to report results that exceed current second-quarter consensus expectations because of the continuing benefits of our restructuring, strong revenue growth, and our cost-control efforts,” said Glenn Tilton, United’s president, CEO and chairman.

Wall Street had been expecting earnings of 46 cents per share, according to a Thomson Financial poll of nine analysts.

UAL expects operating revenue to rise 16 percent to $5.1 billion from $4.4 billion last year; operating earnings are pegged at $260 million compared with $48 million last year.

Analysts expect revenue of $5.04 billion.

The better-than-anticipated results come despite higher fuel costs that have hampered the entire industry. UAL expects to report that second-quarter average jet-fuel costs added 27 percent to $2.16 per gallon.

Revenue per available seat mile is estimated to have risen 12 percent to 12.03 cents.

For the current quarter, UAL said it has 28 percent of its planned fuel consumption hedged at $1.66 per gallon, excluding taxes. The company anticipates third-quarter capacity — measured by available seat miles — to increase by 3 percent to 3.5 percent.

UAL said the second-quarter guidance is designed to help potential investors assess a $726 million debt offering mandated by the company’s bankruptcy reorganization to take place by Aug. 1. Those notes were part of United’s reorganization plan in bankruptcy, partially compensating employees for losses incurred when the company terminated and replaced its pension plans.

Copyright 2006 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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