Cash-short UAL gets waiver in penalty

UAL Corp.'s United Airlines said its largest credit-card processor temporarily waived a penalty that takes effect if the carrier doesn't maintain a minimum cash balance, in exchange for an interest in some aircraft.

The agreement suspends until Jan. 20, 2010, a requirement to post or maintain additional reserves of more than $25 million with the processor if the airline's cash balance falls below $2.5 billion, the Chicago-based airline said today in a U.S. regulatory filing. Jean Medina, a company spokeswoman, said the waiver is from JPMorgan Chase & Co.

The waiver helps United conserve funds after four straight quarterly net losses and a drop in demand for air travel. UAL ended the third quarter with $2.9 billion in unrestricted cash, $248 million in cash dedicated to specific uses and $378 million in deposits related to fuel hedges, which are contracts used to guard against price swings.

United, the third-largest U.S. carrier, also said it expects to report about $232 million in cash fuel-hedging losses this quarter, and non-cash costs of $138 million to adjust the hedges to current market values. Revenue for each passenger flown a mile will increase between 2 percent and 4 percent from a year earlier, the company said in the filing.