UAL shares soar after boosting liquidty and posting better than expected results
Posted by: in Products and ServicesFiled under: Earnings reports, Products and services, JPMorgan Chase (JPM), UAL Corp (UAUA)
Shares of UAL Corp. (NYSE: UAUA), the parent company of United Airlines, soared this day after the Chicago-based company announced it had enhanced its liquidity by $1.2 billion. The company also posted second quarter results that were not as dismal as Wall Street had expected
The company will receive a payment of $600 million from JPMorgan Chase & Co. (NYSE: JPM) related to the advance purchase of frequent flier miles. In addition, the level of reserves that United is required to maintain under its credit card processing agreement with Chase Paymentech has been reduced to $25 million, a move which will free up about $350 million in previously restricted cash. UAL anticipates the frequent flier payment to improve cash flow by about $200 million over the next two years.
“Combined with the previously announced approximately $550 million raised from new transactions in the second and third quarters, the company will have increased its total cash balance by $1.7 billion and continues to have more than $3 billion in unencumbered hard assets,” UAL stated in a press release.
Like all airlines, United is getting pounded by record-high oil prices. The company also announced plans this day to cut 7,000 jobs as it posted a whopping $2.73 billion loss in the second quarter. The pain is expected to continue for some time to come.
“The largest U.S. airlines will cut their fleets by at least 465 jets and eliminate about 26,000 jobs this year to stem losses,” Bloomberg News stated. “More reductions are possible as the slowing U.S. economy damps travel demand, analysts have stated.”
Airline stocks are like airline travel: best avoided unless totally necessary.
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