ATW Daily News

United boosts cash position but sees losses on fuel hedges

Friday September 19, 2008

United Airlines said yesterday that it had raised $1 billion by amending its credit card marketing services agreement with Chase Bank but also warned that it likely will take a $225 million fuel-hedging loss in the third quarter.

UA reached agreement on amendments to its co-branded card marketing services agreement with Chase and its credit card processing agreement with Chase/Paymentec that will boost its liquidity by $1 billion in the short term and an additional $200 million over the next two years. VP-Investor Relations Kathryn Mikells, who will take over as CFO on Nov. 1, said yesterday at the Calyon US Airline Conference that UA continues to make maintaining "the appropriate level of liquidity" a top priority. "As we all know, cash is king," she said. "We continue to lead our peers in free cash flow."

But the company expects to take a nonoperating income loss of $225 million in the third quarter owing to the fact that it has hedged 51% of its second-half 2008 fuel based on per-barrel crude oil prices of $111-$112. Per-barrel prices closed at just under $98 yesterday. Mikells said UA's fuel hedges for 2009 are based on per-barrel prices of $118.

by Aaron Karp

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