United Airlines Trims Loss

The carrier says it continues to make progress in its chapter 11 reorganization.
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UAL

, the parent of United Airlines, shares rallied 5.6% as the bankrupt carrier continues to show signs of improvement, announcing January losses were narrower than a year ago.

The world's second-largest airline announced a net loss of $252 million, including $26 million in charges due to its reorganization. In a sign of how its core business was doing, United posted an operating loss of $191 million, down from $331 million a year ago.

Business fundamentals continue to improve, with United saying that passenger unit revenue rose 8% year-over-year, a sizable improvement to its legacy carrier peers. On the expense side, unit costs, excluding fuel and special charges, fell 14% year-over-year.

"United is continuing to move steadily ahead with its reorganization efforts," said Jake Brace, United's CFO, in a statement. "Our financial results show progress compared to January a year ago, and United continues to outpace our competitors in passenger unit revenue improvement, despite the seasonally weak demand across the industry."

The carrier burned $131 million in cash during January, ending the month with $2.2 billion in cash, $650 million of that restricted. United said it met financial targets, reaching earnings before interest, depreciation, amortization and aircraft rent of $901 million over the last 12 months, in line with debtor-in-possession covenants.

In reaction to the news, shares of United, which only trade over the counter and are not covered by Wall Street, rose 13 cents to $2.35, the highest point since shares began trading in April 2003. So far this February, United's stock is up nearly 40% -- not including today's gain.

But while United's performance continues to improve as the carrier enters its fifteenth month under bankruptcy protection, investors who think they can cash in on the carrier's improvements are sorely mistaken.

If and when United emerges from bankruptcy protection -- a matter that remains unsettled after the carrier filed for another extension with a bankruptcy court judge earlier in the month -- even the airline admits the shares that investors are buying will likely be worth nothing.

"While United's stock continues to be traded on the Bulletin Board exchanges, the company believes its equity securities have little or no value and are highly likely to be canceled under the plan of reorganization," United warns on its Web site.