July 22 (Bloomberg) -- UAL Corp.'s United Airlines, the world's second-largest carrier, said it will cut 7,000 jobs after record fuel costs pushed the company to a quarterly loss of $2.73 billion.

Excluding costs for writing down the value of assets, the second-quarter loss was narrower than analysts' estimates, and the shares rose.

UAL's results pushed the collective deficit among the three biggest U.S. carriers to $5.22 billion, following last week's losses by AMR Corp.'s American Airlines and Delta Air Lines Inc. United's jet-fuel expense climbed 53 percent from a year earlier to $1.85 billion, outpacing fare increases and new fees.

``Much of the requirement for people is driven by flights and seats,'' said Jon Ash, president of Washington-based consulting firm InterVistas-GA2. ``When you take flights and seats out of the system, you've got to take people out.''

The job reductions consist of 5,500 hourly workers and 1,500 salaried employees announced previously, Chicago-based UAL said in a statement. The cutbacks will be completed by the end of 2009. UAL had about 55,000 employees at the end of 2007, according to data compiled by Bloomberg.

United boosted its 2008 goal for non-fuel cost savings by 25 percent to $500 million and said it will further trim global seating capacity by as much as 2 percent in the fourth quarter and 2009.

Excluding $2.6 billion in non-cash charges for the writedown and severance, the loss was $151 million, or $1.19 a share, UAL said. On that basis, UAL was projected to report a loss of $2.05 a share, the average of 10 analyst estimates compiled by Bloomberg.

Shares Advance

UAL jumped 83 cents, or 17 percent, to $5.82 at 10:21 a.m. New York time in Nasdaq Stock Market composite trading. The company has been this year's worst performer among 14 carriers in the Bloomberg U.S. Airlines Index, tumbling 84 percent.

Year-earlier earnings were $274 million, or $1.83 a share. Sales rose 3 percent to $5.37 billion.

``Our industry is challenged as never before by the unrelenting price of oil,'' Chief Executive Officer Glenn Tilton, 60, said in the statement.

UAL's second-quarter loss included previously announced costs of $2.3 billion to eliminate so-called goodwill, $194 million tied to retiring Boeing Co. 737s, $82 million for severance and $54 million for projects that have been terminated or indefinitely deferred.

The largest U.S. airlines will cut their fleets by at least 465 jets and eliminate about 26,000 jobs this year to stem losses. More reductions are possible as the slowing U.S. economy damps travel demand, analysts have said.

United expects to add revenue when it creates an alliance with Continental Airlines Inc. to book seats on each other's planes, share frequent-flier miles and create joint marketing plans. The carriers will ask U.S. regulators this week to approve Continental's shift to United's Star Alliance airline group.

To contact the reporter on this story: Mary Schlangenstein in Dallas at maryc.s@bloomberg.net

Last Updated: July 22, 2008 10:24 EDT