United has seen some improvement in bookings

UAL Corp, the bankrupt parent of carrier United Airlines, has reported the biggest loss of the season within its industry.

Blaming the conflict in Iraq and the weak economy, the company announced a quarterly loss of $1.3bn (�806m; 1.2bn euros).

Its shortfall topped a $1bn loss posted in the same quarter by rival AMR Corp, parent of the struggling carrier American Airlines, which has recently avoided bankruptcy.

The airline industry has been hit by a downturn in travel, following the economic slowdown, the war in Iraq and the outbreak of the virus Sars.

'Fierce' environment

UAL's operating revenue fell to $3.18bn in the quarter, which runs from January to the end of March, compared with $3.29bn a year earlier.

"The first quarter was particularly difficult, given travellers' concerns about the conflict in Iraq, the weak economy and a fierce low-fare environment, as well as speculation about our company's future," said Glenn Tilton, chairman, president and chief executive.

UAL filed for bankruptcy protection in a US court last December, and earned the dubious distinction of becoming the air travel sector's biggest bankruptcy to date.

The airline believes it is making positive progress, not least because it has secured the approval of the bankruptcy court to cut labour costs by $2.56bn a year over the next six years.

The cuts were needed so that the airline could collect cash from its lenders to restructure.

Signs of hope

United also said it expects capacity for the rest of the year to be lower than previously thought. In addition, the airline has noticed some improvement in trans-Atlantic bookings.

However, United added that because of Sars a drop in bookings on flights to the Pacific region will still hurt revenues.

UAL's loss included $248m for restructuring of the airline, while it is in bankruptcy, and another �137m for write-downs of investments.

Most of the major US airlines reported heavy losses. Delta Air Lines reported a first-quarter loss of $466m, while Northwest Airlines announced a net loss of $396m.

Only low-cost carriers with no international routes, such as JetBlue Airways, managed to report profits during the quarter.