UAL Expects Profit to Top Wall Street Expectations
CHICAGO -- United Airlines parent UAL Corp., in a surprise for Wall Street, said it expects to post second-quarter net income of $119 million, its first profit since 2000, reflecting improving industry conditions and cost-control efforts.</br></br>Shares of the nation's second-largest airline by traffic, behind AMR Corp., rose on the news, rising $1.25, or 4.6%, to $28.20 in 4 p.m. composite trading on the Nasdaq Stock Market. UAL said it announced preliminary results yesterday to guide investors ahead of the issuance to employees of $726 million of convertible notes, a requirement of its plan of reorganization.</br></br>The expected profit is more than twice the estimate of analysts surveyed by Thomson Financial. The company said its revenue rose 16% to $5.1 billion from a year earlier. Revenue from each mainline jet seat flown a mile increased 12%. UAL said it generated $500 million in cash since March 31, boosting its unrestricted cash balance to $4.2 billion, despite higher fuel expenses.</br></br>On the expense site, United said it intends to lop $300 million from its costs this year and hopes to achieve a portion of its 2007 cost- reduction target of $400 million in 2006. Part of the savings will come from cutting at least 1,000 salaried and management jobs this year. UAL said its unit cost, or the cost to fly a mainline seat a mile, increased 9%. Excluding fuel and special items in both quarters, unit cost declined by 1.6%. The company said it expects its unit cost, excluding fuel and one-time items, to decline in the third and fourth quarters as well.</br></br>The preliminary results "represent a considerable improvement," Standard & Poor's Corp. airline analyst Philip Baggaley said in a research note. He said United's unit costs remain "materially higher" than those at AMR's American Airlines. United expects to announce final second-quarter results Monday.