Earnings Preview: United Airlines expects 2Q loss

OVERVIEW: It is hard to overstate the damage that rising oil prices have done to airlines during the past quarter, including United. The Chicago-based carrier announced plans to cut capacity and lay off or furlough as many as 2,550 people, and will offer early outs to hundreds of ground workers and flight attendants. United, the nation's second-largest carrier, has also said it will raise some of its cheapest fares as much as $90 one-way, and that it will begin requiring minimum stays for nearly all domestic coach seats beginning Oct. 6.

Those moves will not prevent a major loss during the second quarter, though. United announced on July 11 that it will take non-cash accounting charges of $2.6 billion to $2.7 billion. As much as $2.3 billion of that will be to write down all the goodwill on its books. It also expects a $246 million charge for retiring Boeing 737s.

The merger and acquisition picture has changed dramatically for United during the quarter. Two weeks into the quarter Delta Air Lines Inc. announced a stock swap to acquire Northwest Airlines Corp. That suggested a deal involving United, whose Chairman and CEO Glenn Tilton had long advocated for airline consolidation, could soon follow. But in April Continental Airlines Inc. said it will stand alone, and talks with US Airways Group Inc. fell apart, too. Instead, last month United and Continental announced an alliance in which they will sell tickets for each others' flights.

BY THE NUMBERS: Analysts, on average, expect a second-quarter loss of $2.05 per share on revenue of $5.39 billion, according to a survey by Thomson Financial.

ANALYST TAKE: JPMorgan analyst Jamie Baker upgraded UAL shares to "overweight" on Friday. "United shares have fallen too fast and furiously, implying a higher risk of near-term bankruptcy than justified, in our view," he wrote. Still, he said the shares are "not for the meek."

WHAT'S AHEAD: Investors will want to know whether United thinks capacity cuts, layoffs, and fare increases will sustain it through a period of high oil prices.

STOCK PERFORMANCE: UAL shareholders endured a free-fall beginning when the company reported results for its last quarter on April 22. The shares, which hovered in the low $20s, traded as low as $2.80 on July 15. They traded around $5.50 on Friday.

(This version CORRECTS Corrects lay off an furlough plans to 2,500, sted 2,950)