UAL sees 2Q passenger revenue down sharply

Elk Grove Twp.-based United Airlines said on Wednesday that it expects a key measure of passenger revenue to drop as much as 18.9 percent in the second quarter, although costs are falling, too.

The nation's third-largest carrier said it expects the money it collects for flying each passenger one mile across its system -- called consolidated unit revenue -- to fall to 10.05 cents to 10.17 cents, which would be a drop of 17.9 percent to 18.9 percent compared with the second quarter of 2008.

United said its operating expense not counting unsettled fuel hedges and profit sharing would fall to 11.44 cents to 11.48 cents, a drop of 19.6 percent to 19.9 percent.

United also said it expects to comply in the second quarter with a loan covenant that requires it to maintain a minimum level of earnings before interest and taxes versus its fixed expenses. An agreement with the airline's lenders had suspended the covenant for a year but it has now resumed.

Shares of United parent UAL Corp. rose 19 cents, or 5 percent, to $4.01 in midday trading.

United and other U.S. airlines have used lower fares to help win passengers in the recession. Delta Air Lines Inc., AMR Corp.'s American Airlines and Continental Airlines Inc. all recently announced additional cuts in seating capacity to help increase pricing power.

Traffic, or miles flown by paying passengers, may fall as much as 13 percent in United's main jet operations and as much as 11 percent including regional partners, the carrier said.