-- Citing nearly $1 billion in higher jet fuel costs, United Airlines' parent UAL UAL on Tuesday reported a third-quarter net loss of $779 million or $6.13 per share.
The airline's loss was due to high fuel prices during the quarter and accounting charges related to markdowns in the value of some fuel hedging contracts after oil prices fell sharply by the end of the period. Those non-cash charges were $519 million.
Its net loss compared with a profit of $334 million, or $2.21 a share, in the third quarter last year.
Not including the special items, United lost $252 million.
"Oil prices reached unprecedented levels during the last quarter," said CEO Glenn Tilton in a conference call with Wall Street analysts and news media. "Failing financial institutions and tight credit markets are affecting us all."
Jet fuel cost United $946 million more in the third quarter than a year earlier, a nearly 65% increase. Tilton and Chief Operating Officer John Tague said if fuel prices remain low, UAL and the industry will have a better fourth quarter.
Because United — like most carriers — has been cutting routes and flights to cut costs, its flying capacity shrank 3.6% year-over-year in the third quarter. Total passenger revenue rose 1.4%, while passenger revenue for every seat flown one mile rose 5.7%. This quarter, United's domestic and international flying capacity on full-size jets will be down at least 11.5% year-over-year.
The executives noted that passenger demand is softening on domestic and international routes. The trend reflects the economic downturn as well as higher fares carriers have been charging.
United has been hurt by economic softness in certain international regions where it flies. It is reducing flying capacity to mainland China and halting its Los Angeles-Hong Kong route.
The non-stop route between Denver and London Heathrow will also be discontinued because of weak demand. However, United is launching service between Washington Dulles and Dubai next week and between Dulles and Moscow in March.
United ended the September quarter with $2.9 billion in cash and says it owns $3 billion in other unencumbered assets, mainly aircraft, that it could use if necessary to raise more cash.
United said it is actively exploring spinning off its MileagePlus frequent-flier program as a stand-alone business. It has promoted Executive Vice President Graham Atkinson to president of MileagePlus.