United's Fuel Bill Is $9.5 Billion

Suffering from high oil prices, the No. 2 U.S. airline supports legislation to allow further regulation of oil futures trading

by The Associated Press

United Airlines projected its 2008 fuel bill to hit $9.5 billion based on current prices—more than $3.5 billion higher than last year. The nation's No. 2 carrier made the forecast in a statement submitted in Washington on June 17 to back legislation aimed at enabling additional regulation of oil futures trading, where volatility has spurred record prices.

United parent UAL (UAUA) also estimated passenger revenue for the second quarter will increase by between 4% and 5% over a year ago. It said in an investor update that it will take significant second-quarter charges for impairment, severance, and the termination of contracts in connection with cutbacks it announced this month.

Operating Costs Up 3% to 3.5%

In addition, UAL said it expects deferred revenue accounting for its Mileage Plus frequent-flier program to decrease noncash consolidated passenger revenue by about $47 million in the second quarter.

Cargo, mail, and other revenue is projected at between $470 million and $480 million for the quarter, UAL said in the update, which was filed with the Securities & Exchange Commission. Mainline operating costs per available seat-mile, excluding fuel and certain one-time items, are expected to be up 3% to 3.5% compared with the second quarter of 2007.

Jet fuel prices are expected to average $3.31 per gallon, or $3.67 per gallon excluding economic hedges. Fuel consumption is expected to total 573 million gallons in the second quarter. Consolidated passenger traffic is expected to be down 4.25% to 4.75% for the second quarter, on a 1.4% decrease in capacity.

Chicago-based United and other airlines are under severe financial pressure from record oil prices. UAL shares rose 9¢, to 7.28 in morning trading on June 17. They have traded in a 52-week range of 5.58 to 51.60.

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