8:00PM New York – UAL stock plunged after it reported larger than estimated loss on higher fuel cost.

UAL Corporation the parent of United Airlines, Inc. reported first quarter 2008 total revenues increased by 7.7% $4.71 billion in the first quarter of 2008 compared to $4.3 billion a year ago.

Aircraft fuel expense rose 51.3% to $1.6 billion from $1.1 billion and average fuel price jumped to $2.83 from $1.889 per gallon. Aircraft fuel expense is now 30% of total operating expense, single largest expense item of all expense categories.

First quarter net loss was $537 million or $4.45 per diluted share compared to loss of $152 million or $1.32 per share, a year earlier. Fuel cost in the quarter jumped by $618 million.

Total revenues increased 7.7% in the first quarter of 2008 from a year ago driven by growth in passenger and cargo revenue, partially offset by a decline in other operating revenues due to the elimination of $22 million in pass-through sales of fuel subsidiary, UAFC.

The company will permanently remove 30 narrow-body aircraft from its operations, 10 to 15 more aircraft than initially announced last month.

The company is now targeting $200 million in non-fuel cost savings, in addition to the $200 million announced earlier this year, for a total of $400 million.

Domestic capacity to shrink

The airline flew 6.7% fewer passengers in the quarter compared to a year ago totaling 15,250 and load factor on United flights not including region traffic rose to 85.5% from 81.7%. The company operated 460 aircrafts in the quarter, same as in the previous year quarter. Regional affiliates operated 275 aircrafts compared to 289 in the prior year.

The company is further shrinking 2008 mainline domestic capacity. By the fourth quarter of 2008 mainline domestic capacity will be down approximately 9 percent year-over-year. This reduction follows a 5 percent reduction in the fourth quarter of 2007. Consolidated capacity will be approximately 4 percent lower than prior year levels for the fourth quarter of 2008.

Jake Brace, EVP and chief financial officer said, “We are responsibly reducing our fleet, eliminating less efficient aircraft that are not profitable in this fuel environment.”

Company looks for ways to cut cost

The company is also reducing 2008 capital expenditures by approximately $200 million from $650 million in expenditures previously planned.

The company expects to reduce its salaried and management workforce by 500 employees and its represented workforce by approximately 600 employees by year-end.

Cash flow turns negative

Due primarily to escalating fuel prices, the company generated negative operating cash flow of $80 million.

The company made a special distribution of approximately $250 million to stockholders during the quarter and reduced on and off balance sheet debt by $195 million, ending the quarter with unrestricted cash and short-term investments balance of $2.9 billion and a restricted cash balance of $728 million.

Free cash flow declined to a negative $181 million.

Yield management

The company's mainline Revenue per Available Seat Miles increased by 8% from the first quarter of 2007. The company's cargo business rose 29.8% from a year ago. Total passenger revenues increased 8.1% in the first quarter compared to the prior year driven by an 11.6% consolidated yield improvement.