United Airlines’ parent, UAL Corp., Thursday reported its second consecutive quarterly profit, but the nation’s largest carrier expects to lose money in the final quarter and for all of 1993.
For the third quarter, UAL posted a profit of $149 million, or $5.74 a share, compared with earnings of $6 million, or 27 cents a share, a year earlier. Revenues rose 11.6 percent, to almost $4 billion from $3.6 billion a year earlier.
“Our improvement over last year’s third quarter is principally attributable to our stringent program of cost control, as well as generally stronger revenue performance on our longer-haul routes,” said Stephen M. Wolf, UAL’s chairman and chief executive.
However, “despite the third-quarter profit, we will report a loss in the fourth quarter and for the year as a whole,” Wolf added.
Wolf did not elaborate, but his prediction is in line with most analysts, who foresee at least some airlines losing money in the last quarter, when airline traffic historically drops off.
Still, UAL’s third-quarter earnings were more than many Wall Street analysts had expected and contributed to a $6-a-share rise in the company’s stock, to $152.75, on the New York Stock Exchange.
In fact, UAL’s earnings report, along with the $60.3 million in quarterly profits posted by Delta Air Lines Thursday, gave further credence to speculation among analysts that the airline industry may finally be emerging from its three-year depression.
Delta’s profit amounted to 65 cents a share, contrasted with a loss of $125.2 million, or $3.07 a share, in the same period last year. It was the first profit in two years for the nation’s third-largest carrier.
AMR Corp., parent of American Airlines, the nation’s second-largest carrier, reported third-quarter profits of $118 million earlier this month.
UAL’s third-quarter earnings included a $59 million pretax writedown associated with the carrier’s retirement of 15 McDonnell Douglas jumbo jets in the period.
It also included a gain of $44 million for settlement of a pension reversion dating back to 1985. Excluding these items, earnings for the third period would have been $159 million, or $6.16 a share, the company said.
Also heartening for United was the fact that its costs, measured in available seat miles, declined 4.2 percent in the third quarter, to 8.99 cents from 9.38 cents. Personnel costs also were down almost 3 percent, and food and beverage expenses dropped 10.2 percent.
“United’s cost performance was very impressive in the quarter,” said Samuel Buttrick, analyst at Kidder, Peabody & Co.
In the second quarter this year, UAL earned $22 million after losing $1.4 billion the previous 2 1/2 years.
For the first nine months of 1993, United earned $15 million, for a loss of 38 cents a share after paying preferred dividends, compared with a loss of $733 million, or $30.48 a share, in the first three quarters of 1992. Revenues for the period increased to nearly $10.9 billion from $9.7 billion.
What makes Wolf pessimistic about the carrier’s financial performance for the long term is that United’s short-haul flights, unlike most of the long-distance ones, continue to lose money.
“We face increasingly intense, low-cost competition on our shorter-haul operations,” he said, referring to Southwest Airlines and other low-cost carriers that have been financially slamming United and other major carriers on shorter flights.
In an effort to remedy the situation, United and the unions representing its pilots and machinists are in negotiations over the possibility of creating a low-cost carrier within United that would fly its short-haul routes and do battle with Southwest and the growing number of other discount carriers.
In exchange for wage and benefit concessions that would make it possible for United to operate such a second-tier airline, the unions want a majority ownership stake in United.
It isn’t clear whether the unions are willing to accept enough wage and benefit cuts and work-rule changes to gain control of the carrier.
Negotiations betwen the airline and unions continued behind closed doors in New York Thursday and are now expected to continue through the weekend.
The unions face a Nov. 13 deadline to reach an agreement with United. Unless a deal is struck, United is scheduled to complete the sale of 15 of its flight kitchens to Dobbs International Services Inc. on that day.
The sale of the flight kitchens would eliminate some 5,200 jobs at United and likely would bring a halt to the talks between the unions and United management.
