updated 4/22/2008 12:31:42 PM ET 2008-04-22T16:31:42

United Airlines parent UAL Corp. lost nearly a third of its market value Tuesday after reporting a $537 million first-quarter loss due to soaring fuel costs and saying it is cutting flights and 1,100 jobs.

The sell-off accelerated and shares of other airlines dropped midmorning, after Delta Air Lines Inc. CEO Richard Anderson said in Washington that in the face of record fuel prices domestic carriers would need to raise fares by 15 percent to 20 percent just to break even.

Anderson said higher fares would likely diminish demand for air travel, and prompt carriers to further reduce their schedules.

UAL’s loss, in what the company called an “extraordinarily difficult” environment for airlines, was the biggest since the nation’s second-largest carrier emerged from bankruptcy in 2006 and worse than Wall Street expected. Shares in the company plummeted 34 percent to $14.06 in morning trading.

UAL said its nearly 8 percent growth in revenue from the first quarter of 2007 was more than offset by a $618 million jump in fuel costs, which rose nearly 50 percent in a year.

Oil prices rose Tuesday to an all-time high above $118 a barrel. The cost of jet fuel in New York last Tuesday was $3.73 a gallon, compared with about $2.06 a year earlier.

UAL follows American Airlines parent AMR Corp. and Continental Airlines Inc. into the red for the quarter because of fuel costs. Southwest Airlines Co. is the only large carrier to have reported a profit so far. Delta and Northwest report first-quarter results on Wednesday, while US Airways Group Inc. reports Thursday.

Among smaller carriers, JetBlue Airways Corp. reported an $8 million loss Tuesday that was narrower than expected, as slower growth helped the discount airline keep a lid on its costs despite skyrocketing fuel prices.

High oil prices and the global credit squeeze are also affecting demand for new planes. While airlines can still negotiate substantial discounts, European planemaker Airbus said Tuesday that the ever-weaker dollar and high metals prices are forcing it to raise prices. Airbus announced increases of as much as 3 percent to catalog prices — on top of the 2.74 percent annual hike for 2007 already programmed.

Chicago-based UAL said it will lower its planned 2008 spending by $400 million and eliminate 500 salaried and management jobs and 600 union jobs by the end of the year. UAL also said it will cut capacity 9 percent by the fourth quarter, on top of a 5 percent reduction in the fourth quarter of 2007, and take 10 to 15 more narrow-body aircraft out of its operating fleet for a total of 30 to be grounded.

“Although both our revenue performance and our non-fuel cost performance were good this quarter, they were not enough to offset the significant and rapid rise in fuel prices,” CEO Glenn Tilton said in a message to employees.

“The path to sustainable profitability requires us to fundamentally overhaul every facet of our business,” Tilton said.

Combining with another carrier could be next, especially in the wake of the proposed tie-up this month of Delta and Northwest Airlines Corp. While Tilton did not specifically address talks with Continental, he did say that consolidation is “one of the changes required to address the gap between where we stand today and profitability and sustainability.”

UAL’s net loss for the January-through-March quarter amounted to $4.45 per share, compared with a loss a year earlier of $152 million, or $1.32 per share. Revenue was $4.71 billion, up from $4.37 billion. Analysts were expecting $4.75 billion.

© 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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