United sees 2008 fuel costs hitting $9.5 billion

Airline’s fuel bill expected to be more than $3.5 billion higher than 2007

updated 11:21 a.m. ET June 17, 2008

CHICAGO - United Airlines on Tuesday projected its 2008 fuel bill to hit $9.5 billion based on current prices, or more than $3.5 billion higher than last year.

The nation’s No. 2 carrier made the forecast in a statement submitted in Washington to back legislation aimed at enabling additional regulation of oil futures trading, where volatility has spurred record prices.

United parent UAL Corp. also estimated that passenger revenue for the second quarter will increase by between 4 percent and 5 percent over a year ago. It said in an investor update that it will take significant second-quarter charges for impairment, severance and the termination of contracts in connection with cutbacks it announced this month.

Story continues below ↓

advertisement | your ad here

In addition, UAL said it expects deferred revenue accounting for its Mileage Plus frequent flyer program to decrease non-cash consolidated passenger revenue by about $47 million in the second quarter.

Cargo, mail and other revenue is projected at between $470 million and $480 million for the quarter, UAL said in the update, which was filed with the Securities and Exchange Commission.

Mainline operating costs per available seat mile, excluding fuel and certain one-time items, are expected to be up 3 percent to 3.5 percent compared with the second quarter of 2007.

Jet fuel prices are expected to average $3.31 per gallon, or $3.67 per gallon excluding economic hedges. Fuel consumption is expected to total 573 million gallons in the second quarter.

Consolidated passenger traffic is expected to be down 4.25 percent to 4.75 percent for the second quarter, on a 1.4 percent decrease in capacity.

Chicago-based United and other airlines are under severe financial pressure from record oil prices.