The Wall Street Journal-20080123-Earnings Digest- UAL Posts Loss- Declines to Reveal if It Is in Merger Talks
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Earnings Digest: UAL Posts Loss, Declines to Reveal if It Is in Merger Talks
Executives of United Airlines parent UAL Corp., in discussing the company's narrowed fourth-quarter loss, declined to comment on whether they are in active merger negotiations with other carriers.
But they stressed they remain interested in industry consolidation and think it could help U.S. carriers better compete against powerful international rivals and return value to shareholders.
This month, Delta Air Lines Inc.'s board authorized its chief executive officer to begin simultaneous merger talks with UAL and Northwest Airlines Corp., with a goal of swiftly choosing a preferred partner by early next month, people familiar with the matter have said. All three airlines have declined to comment on that development.
Delta, the U.S.'s No. 3 airline by traffic, completed preliminary talks in December with Northwest, United and Continental Airlines Inc., before moving ahead with more formal talks with No. 2 United and No. 5 Northwest this month, these people said. AMR Corp.'s American Airlines ranks No. 1.
UAL, based in Chicago, said fourth-quarter revenue grew 9.7% to $5.03 billion, and unit revenue, the amount of passenger revenue taken in for each seat flown a mile in a mainline jetliner, was up 13%. The fourth-quarter results were hurt by soaring fuel prices, rising costs in other areas and an exceptionally stormy December, which caused the airline to cancel many flights and operate others with long delays.
In 4 p.m. composite trading, UAL shares were down 3% at $31.87 on the Nasdaq Stock Exchange, amid a broader market downturn.
U.S. Rep. Jim Oberstar, a Minnesota Democrat, last week told the Star-Tribune newspaper in Minneapolis that two Northwest executives visited him and said Delta is looking at both Northwest and United as merger options. The congressman, who is chairman of the House Transportation and Infrastructure Committee, said he had concerns that a marriage of two would lead to a cascade of other mergers that could hurt consumers.
Many analysts think consolidation in the industry is necessary, especially in light of high oil prices and the waning economy. They also believe merger talks must occur quickly because such deals are more likely to be approved by federal regulators under the Republican administration. But antitrust approval of one or more big airline tie- ups isn't a certainty, and other issues that must be worked out are labor structures, route networks and broader airline alliances that already exist among major U.S. and foreign carriers.
Glenn Tilton, chairman and CEO of UAL, has been a proponent of consolidation for more than three years, but earlier efforts to find a partner in Delta and Continental have gone nowhere. Delta repelled a hostile takeover bid by US Airways Group Inc. a year ago, but is under new management that appears more interested in the concept of joining forces with another airline.
Mr. Tilton, on a conference call yesterday, said "the goal for our company is to make the right choice at the right time." He referred to an employee bulletin he issued last week, in which he told United workers, "Our position has always been that we control our decisions; no one makes them for us." The CEO said "the advantage of our situation is that we have choices that we continue to consider with our board."
United has been soliciting potential buyers for its San Francisco heavy-overhaul business and weighing whether to spin off its Mileage Plus frequent-flier program to improve holder value.
United is continuing to study proposals from strategic and private- equity investors interested in the maintenance business and promises to break out a separate profit-and-loss statement for Mileage Plus starting in the first quarter, steps that will prepare it to sell both businesses if it chooses.
