From: Associated Press

CHICAGO (AP) -- Record fuel costs and low air fares contributed to a $274 million third-quarter loss for United Airlines' parent company, which warned again that labor costs must be slashed again soon in order for it to emerge from bankruptcy.

UAL Corp.'s results, announced Thursday, marked 17 straight money-losing quarters for the nation's No. 2 carrier and closed the books for the airline industry on a busy but financially abysmal July-through-September period -- traditionally its best. The parent of US Airways also reported third-quarter numbers, including a $232 million net loss that more than doubled its total of a year ago.

The seven largest U.S. carriers reported more than $1.3 billion in combined net losses for the quarter and lost $5.1 billion for the first nine months of 2004.

Discount carriers also are increasingly feeling squeezed. JetBlue Airways Corp. said Thursday its profit plunged 71 percent in the quarter, cut sharply by industry competition, record-high fuel prices and the effects of hurricanes. ATA Airlines filed for Chapter 11 bankruptcy protection on Tuesday.

Airline industry analyst Ray Neidl of Calyon Securities called the quarter another "disaster" for large legacy carriers, which include all of the top seven except money-making Southwest Airlines.

"Three years after 9/11, they have not really shown much financial improvement," Neidl said. "We've had two years of economic growth and traffic is coming back very strong. Yet because of all the capacity, they have no control over pricing. And fuel costs are going through the roof."

The good news, he said, is that some carriers are moving to reduce capacity and cut their overall cost structures.

United is still in cost-cutting mode after reporting an $80 million operating loss despite an 11 percent increase in passenger traffic. Its net loss for the July-through-September quarter amounted to $2.38 per share, narrowed from a loss a year earlier of $367 million, or $3.47 per share.

Revenues rose 7 percent to $4.31 billion from $4.01 billion.

The Elk Grove Village, Ill.-based company said earlier this month that even after reducing its annual costs by $5 billion -- half from labor -- during its 22-month-old bankruptcy restructuring, it needs significantly more cost cuts than anticipated because of the industry's deteriorating financial outlook.

Executives said again in disclosing quarterly results that eliminating employee pension plans, which they still cite as likely, won't be enough to make United financially competitive with fares the lowest they've been in more than a decade.

"Even though our unit revenue performance was on par with our peers, the pricing environment prohibits us from recouping high fuel costs," said chief financial officer Jake Brace. "Given the urgency of United's situation and the stark financial reality in the entire industry, United believes that it will have no choice but to seek significant additional labor savings beyond terminating and replacing our pension plans."

United is working on a new business plan, expected to be disclosed in about a month, that it says will involve more than $1 billion in additional cost savings. In addition to cutting wages and benefits again, it also has been reported to be poised for as many as 6,000 job cuts from its work force of 62,000.

The company cited a "strong possibility" that it will fail to meet the requirements of its bankruptcy lenders in the fourth quarter, citing the record fuel prices and continued weakness in the revenue environment. It said it is in discussions with its lenders, who are likely to give the airline more time by renegotiating the terms to avoid a default.

Through nine months of 2004, UAL had a net loss of $980 million, or $8.77 per share, compared with a year-earlier loss of $2.33 billion, or $23.28 per share. Revenue rose 11 percent to $12.4 billion from $11.1 billion.

US Airways Group Inc., the parent of US Airways, reported in disclosing earnings that it was able to maintain its cash reserves at a higher level than forecast -- restricted cash of $733 million as of Sept. 30.

The airline's cash reserves are particularly crucial as it seeks to stay afloat while under bankruptcy protection. Earlier this month, the airline imposed 21 percent pay cuts on all its union workers after a bankruptcy judge likened the company's status to a "ticking fiscal time bomb."

JetBlue said net income fell to $8.4 million, or 8 cents a share, from the prior year's $29 million, or 26 cents a share.

JetBlue shares closed up 41 cents at $22.85 on the Nasdaq stock exchange.