Source: Denver Mountain News
Author: Chris Walsh

United Airlines said fierce competition in Denver has eroded some of its profits here, contributing to a first-quarter net loss that exceeded analyst expectations.

The arrival of discount giant Southwest Airlines last year, coupled with aggressive expansion by homegrown Frontier Airlines and United's emergence from bankruptcy, has helped keep fares low in Denver despite a nationwide increase in ticket prices.

United's Denver hub has "changed significantly from one of our more successful profit contributors" a year ago, Glenn Tilton, the carrier's chief executive officer, said Wednesday on a conference call.

Still, Tilton said United is competing "vigorously," noting that it has added capacity at Denver International Airport - its second- largest hub - on a year-over-year basis.

"It's a very important hub for us, and we have every intention of defending it," Tilton said.

Tilton's comments came after United reported a narrower first-quarter loss compared with the same period a year ago. But the carrier missed Wall Street expectations, saying it added too much capacity in January and took a hit from winter storms in February.

United, which emerged from a three-year bankruptcy in February 2006, has lost money in two straight quarters.

Calyon Securities analyst Ray Neidl dubbed the results "disappointing" but said he is more optimistic going forward, noting that the company appears bullish on bookings during the current quarter.

The Chicago-based airline lost $152 million, or $1.32 a share, in the first quarter. That compares with a 2006 first-quarter loss of $306 million, excluding certain gains tied to United's restructuring. It's not a direct comparison, though, because United emerged from bankruptcy during the first quarter last year.

United - the main business unit of UAL Corp. - saw revenue decrease 2 percent to $4.4 billion. The carrier cut a key cost measure by 4.3 percent, and operating cash flow rose 38 percent.

Boon for consumers

Airfares in Denver during last year's fourth quarter hit their lowest levels in nearly a decade, despite a 2.2 percent increase nationally, according to government data released Wednesday that measures changes in ticket prices.

• Denver fares fell nearly 6 percent during the last three months of 2006 compared with the same period a year ago. Ticket prices haven't been that low in the Mile High City since 1998, highlighting why United and other carriers are feeling financial pressure in Denver.

• Nationally, fares in the fourth quarter hit their highest levels since 2000.