United Airlines Says Bankruptcy Report Untrue

The Chicago Tribune announced the possible bankruptcy of UAL Corporation (UAUA), the parent company of United Airlines.  As the company returned just 2-and-a-half years ago from a previous bankrupcy, the market did not take this suggestion well.  Shares plummeted briefly to $3 per share this morning, only to bounce back to the $9 range — still a 27% drop in share price by noon.

Shares of UAUA had actually been trading as high as around $48 per share in late 2007, but high fuel costs have sent shares to a much lower airspace.  The company seems far from crash-landing, however; 3 analysts in the past month have increased estimate revisions for the September 3rd quarter, and 4 have done so for fiscal year 2008.  Also, the company posted a 41% positive earnings surprise in its most recent quarter earnings results.

Before today’s shake-up, Zacks senior transportation industry analyst Ann Heffron, CFA had kept her Hold recommendation on United shares, linking the company’s poor performance with that of the entire airline industry.

To quote:

This poor performance for the airline industry reflects expectations of higher fuel costs due to surging oil prices…the industry is still hostage to oil prices since fuel is the largest single expense category on the income statement.

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