United Airlines in Worst Ever Loss

UAL, the United Airlines parent, reported losses of $3.2bn for 2002 yesterday, the worst performance in the carrier's history.

Losses at the world's second largest airline compared with a $2.1bn deficit in 2001 and were only just shy of the $3.5bn deficit reported by American Airlines last week.

The industry was dealt a devastating blow by the terrorist attacks of September 2001. The threat of war in the Middle East and soaring fuel costs are worsening the outlook. Full year revenues at United fell by 12% to $14.3bn.

UAL filed for chapter 11 bankruptcy protection in December after failing to win a government backed loan guarantee. It is working on a restructuring plan expected to include the launch of a low-cost brand in the hope of emulating Southwest Airlines - the only US carrier to have stayed in profit in the past two years.

But relations between management and workers are strained. Pilots and flight attendants unions are opposing the launch of a low-cost carrier, accusing management of dismantling the airline. Between 20% and 40% of workers are likely to be transferred to the carrier, which the pilots union claims would destroy already poor morale.

The airline has negotiated a temporary 29% pay cut with the pilots union as part of a measure to save $70m a month in labour costs. Talks are continuing to wring $2.4bn out in costs per year over five years. Another 700 flight attendants will be laid off this month.