United Airlines, a unit of UAL ( UALAQ.OB), more than halved its loss in the second quarter, but warned it will need to make more progress in finding a way to boost cash flow en route to exiting bankruptcy.

United, which announced the largest bankruptcy in the history of commercial aviation in December 2002, posted a net loss of $247 million, or $2.25 a share, a sizable improvement from the net loss of $623 million, or $6.26 a share, it had in the year-ago quarter.

Excluding a number of items and charges related to the carrier's ongoing restructuring under bankruptcy protection, United said its second-quarter loss was $103 million, or 95 cents a share, topping the loss of $226 million, or $2.26 a share, it had last year. Wall Street does not cover the company's shares, which will be canceled and rendered worthless once the carrier exits bankruptcy.

On an operating basis, United said it made $7 million in the second quarter, a $438 million improvement from last year, driven by a $77 million operating profit in the month of June. In reaction, shares of the company rose 2 cents, or 1.7%, to $1.23.

The carrier's total revenue came in at $4 billion, a 30% improvement from the $3.1 billion it had a year ago, driven by a 23.5% jump in passenger revenue. But while the company's top- and bottom-line results are improving, management stressed that it needed to cut costs further in order to survive.

"We are making progress, but we know there is much work to do," said Glenn Tilton, chairman, president and CEO. "Our business plan must generate the cash flow and liquidity that the financial markets are willing to support. It is clear that we must continue to reduce our overall cost structure if United is to be competitive and achieve sustainable profitability."

Expenses came in at $4 billion for the quarter, a 14% increase. Fuel costs rose by $241 million, a 53.3% jump from last year, wiping out the $191 million, or 13.7%, year-over-year drop in labor costs.

Going forward, the carrier said that bookings for August were the same as last year, with September bookings running ahead of schedule.

United reported positive operating cash flow of $62 million, ending the quarter with $2.2 billion in cash, $838 million of that unrestricted.

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