=20 ---------------------------------------------------------------------- This article was sent to you by someone who found it on SF Gate. The original article can be found on SFGate.com here: http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2003/08= /02/BU278441.DTL ---------------------------------------------------------------------- Saturday, August 2, 2003 (SF Chronicle) United hit by loss in quarter/Fewer passengers and restructuring costs are = factors David Armstrong, Chronicle Staff Writer Hammered by declining passenger traffic and weighed down by restructuring costs, bankrupt United Airlines, the nation's second-largest carrier, suffered a $623 million loss in the second quarter. Without $300 million in federal compensation for security expenses relat= ed to the Iraq war, United's drop, which amounted to a loss of $6.26 per share, would have topped $900 million, according to UAL Corp., the airline's parent company. Operating revenue fell 18 percent to $3.11 billion from $3.79 billion a year ago. United, the dominant carrier at San Francisco International Airport with about half of all passengers and flights, has lost about $6 billion since late 2000, largely because of the tepid economy and the terrorist attacks of Sept. 11, 2001. The war in Iraq and the springtime emergence of severe acute respiratory syndrome also hurt United and generated the worst business crisis on record for the aviation industry. Low-cost carriers Southwest Airlines, JetBlue Airways and ATA Airlines bucked the trend and reported profits in the second quarter. American Airlines, the world's largest carrier, lost $75 million, while third-largest carrier, Delta Air Lines reported $184 million in profits, but only because of federal aid. United, in Chapter 11 bankruptcy protection since December, attributed i= ts latest loss to an 11 percent decline in passenger traffic from the same period a year ago, as the airline cut capacity by 14 percent. Despite the red ink, United said it saw signs of a recovery in June -- t= he last month of the quarter -- and met its debtor-in-possession financing targets. The airline said it still plans to emerge from bankruptcy late this year or early next year. The company, located in Elk Grove, Ill., said it has trimmed labor costs by 30 percent after revising contracts with its employee unions. "The second quarter began as a severe challenge for United and the industry as a whole, but we saw a particularly positive trend as we moved though the period," said Glenn Tilton, UAL's chief executive officer. "We realized a 4 percent improvement in domestic passenger unit revenue for June over the same period last year," Tilton said in a prepared statement. "We also achieved a large decrease in our labor and other costs as we continue to implement our various cost-reduction initiatives." United has reconfigured operations in the Bay Area, where it employed 20, 000 people two years ago. It now employs 15,000 here, a UAL spokesman said, including several hundred mechanics who transferred from a maintenance facility at Oakland International Airport to a larger plant at SFO. United closed the Oakland facility on June 30. In addition to making other cost-savings moves such as renegotiating aircraft leasing contracts, United has talked off and on for months about starting its own low-fare carrier. Code-named Starfish, it would use 40 planes from United's existing fleet, the company said last month. A United spokesman refused further comment. United said its day-to-day performance improved in the second quarter. O= n- time departure was the best in United's history at 76.9 percent, and customer complaints were down. United restored earlier cuts in its transatlantic service June 2 and will restore transpacific cuts by Sept. 3. E-mail David Armstrong at davidarmstrong@xxxxxxxxxxxxxxxx=20 ---------------------------------------------------------------------- Copyright 2003 SF Chronicle