UAL ( UAUA), the operator of United Airlines, said a 54% surge in fuel costs pushed it to a second-quarter loss, and the carrier laid out plans to expand its job cuts.

Excluding special items, UAL lost $151 million, or $1.19 a share, in the latest quarter. Revenue rose 3% to $5.37 billion and was roughly in line with estimates. UAL had a profit of $1.83 a share last year.

With noncash accounting expenses, including a $2.3 billion charge for goodwill impairment and $82 million in severance costs, the company lost $2.7 billion, or $21.47 a share.

Fuel costs rose by $773 million in the quarter. "Our industry is challenged as never before by the unrelenting price of oil," said CEO Glenn Tilton in a prepared statement. "The elimination of our entire Boeing 737 fleet and our alliance with Continental ( CAL) are examples of the different approach we are taking to respond to dramatically changed market conditions."

United has said it will reduce fourth-quarter mainline capacity by 15.5% to 16.5%, as it retires 100 aircraft. About 7,000 jobs will be lost by the end of 2009.

"We continue to take the difficult, but necessary action across the company to reduce our costs, including reducing our workforce by more than 7,000 people," said Jake Brace, United executive vice president and CFO, in a press release. "We are maintaining our cost guidance for the year even as we dramatically reduce capacity, and are improving our liquidity, ensuring United is well positioned to weather the current environment."

Investors responded well to the UAL report, and shares were recently up nearly 17% to $5.83.

Continental, AMR ( AMR) and US Airways ( LCC) were also posting double-digit gains. Northwest ( NWA) and Delta ( DAL) were the weakest of the majors, and they were still up 7% each.

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