UAL Plans Fly Under the Radar

A review into the sale of its maintenance and frequent flier businesses is ongoing.
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Updated from 9:45 a.m. EST

United Airlines parent

UAL

(UAUA)

said preparations to sell its maintenance division and frequent flier plan are proceeding on a parallel track with its review into potential mergers.

"If you looked at the situation and said what would you want to happen, you'd want to do consolidation before you did (maintenance) or a frequent flier transaction -- that would increase the scale of the business and the value of the business," said Chief Financial Officer Jake Brace on a conference call following the company's fourth-quarter report Tuesday. "(But) it doesn't make any sense for us to wait for consolidation to happen or not happen; we don't control that one way or the other."

Brace said the carrier is sorting through proposals for its maintenance business, but does not expect to make a decision in the first quarter.

The evaluation the frequent flier program is on a slower track. United expects to be able to separately determine the program's profit and loss by the second quarter, but has not decided whether to publicly report those results. The carrier, which has been speculated to be a potential merger partner for

Delta Airlines

(DAL) - Get Report

, declined to specifically discuss any consolidation plans.

For the fourth quarter, UAL reported a $53 million loss, as rising fuel prices outweighed the impact of higher unit revenue. A year earlier, the company recorded a $61 million loss.

The latest quarter's loss was equivalent to 47 cents a share, narrower than the loss of 55 cents a share it reported a year ago. Analysts had expected a loss of 89 cents a share.

Revenue rose 9.7% to $5 billion, narrowly ahead of expectations.

The carrier also announced a special distribution of $2.15 a share, totaling roughly $250 million, to shareholders of record on Jan. 9.

During the quarter, consolidated fuel expense increased by $359 million. Consolidated passenger revenue per available seat mile, or PRASM, increased 12.6%. Mainline domestic PRASM rose 12.3%, aided by a 5% capacity reduction. International PRASM rose 14.9%, as capacity increased by 5%.

"We aggressively managed to this outcome, leading the industry in reducing capacity domestically while seizing the opportunity to expand internationally," said Executive Vice President John Tague.

Looking ahead, Tague said that despite the slowing economy, "we expect strong revenue improvements in the first quarter, (with) domestic capacity well matched to demand."

The carrier expects full-year 2008 North American capacity to fall 3.5% to 4.5%, while international capacity expands by 5.5% to 6.5%.

On the cost side, mainline cost per available seat mile excluding fuel and special items rose 9.2%, a result of lower capacity, higher heavy maintenance volumes, increased information technology purchasing, increasing spending due to winter storms and other costs.

Excluding special items, United reported net income of $352 million for all of 2007, representing a $417 million improvement over 2006.

UAL shares were trading down $2.02, or 6.1%, to $30.92.