United has seen some improvement in bookings

UAL Corp, the bankrupt parent firm of the world's second largest airline, United Airlines, has recorded another heavy loss, despite receiving large amounts of government aid.

The firm reported a net loss of $623m (�382m, 710m euros) for the April to June period, even allowing for the $300m it received in federal assistance.

However, the loss was an improvement on the previous quarter when the airline made a loss of $1.3bn.

Airline travel has been hit by the conflict in Iraq and the Sars outbreak in Asia, which sharply reduced travel to one of United's most important regions, the Pacific, where passenger numbers were down 34%.

And domestic travel within the US remains fiercely competitive, with new low-cost airlines like JetBlue taking business from the traditional carriers.

The loss compares with a deficit of $341m in the same period during 2002.

In the quarter, United received a $365m corporate tax refund, and received $300m in government compensation for losses in business during the Gulf War, but spent $447m in restructuring costs as it shed jobs and planes.

Grounds for optimism

UAL's operating revenue fell to $3.1 billion, down 18% compared to the same period in 2002.

We saw a particularly positive trend as we moved through the (April to June) period Glenn Tilton, UAL chairman and chief executive

Passenger revenue for the quarter was down 18% from last year on a 14% decrease in capacity, as United reduced flights on its heavily travelled Pacific and trans-Atlantic routes.

The carrier served 5.8 million customers in the quarter, compared to 6.2 million one year ago.

But there were some positive signs, including a better load factor, which was at a record high of 82% of seats filled, and cash flow, which is running at $2m a day.

"The second quarter began as a severe challenge for United and the industry as a whole, but we saw a particularly positive trend as we moved through the period," said Glenn Tilton, UAL's chairman, president and chief executive officer.

United has also had a slight increase in US domestic bookings, and improvements in customer satisfaction and on-time arrivals and departures.

And crucially, it has begun to realise big savings from cuts in wages and benefits after contracts were renegotiated with its staff - who had partly owned the airline.

There was a cut of $543m, or 30% in its wage bill in the quarter, leading to a 9% increase in productivity compared to the same quarter in 2002.

Out of bankruptcy

United says it plans to emerge from its Chapter 11 bankruptcy by the end of the year.

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

It was bailed out by its main creditors, and now has to file a report every month to the US bankruptcy court.

The airline says it has satisfied the terms of its debtor-in-possession financing for the fifth month in a row.

Its shares are expected to be virtually worthless when they resume trading.

Most of the other major US airlines have reported profits in the second quarter, boosted by the one-off government subsidy.

Delta Air Lines reported a second-quarter profit of $184m, while Northwest Airlines announced a profit of $226m.

And United's large rival, American, which narrowly avoided bankruptcy itself, has also trimmed its losses to $357m amidst a big cost-cutting programme.