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Originally published Thursday, January 24, 2013 at 5:10 AM

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United Continental posts 4Q loss as traffic falls

Travelers avoided United Airlines last year, leaving it with a fourth-quarter loss as it continues to pay for its stumbles in absorbing Continental.

AP Airlines Writer

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Travelers avoided United Airlines last year, leaving it with a fourth-quarter loss as it continues to pay for its stumbles in absorbing Continental.

United Continental Holdings Inc. on Thursday reported a $620 million loss for the quarter as passenger traffic dropped 3.2 percent.

The loss was driven by $408 million in spending on the integration for things such as training and repainting airplanes. Superstorm Sandy hurt profits by $85 million, too.

"We are absolutely not satisfied with the financial results we produced last year," said Jeff Smisek, the compay's chairman, president, and CEO.

United, the world's biggest airline, said it will cut 600 administrative and management positions via voluntary buyouts and layoffs. Last month it cut four senior executives, out of a pool of about 50.

Many of the cuts are expected to happen in Chicago. That's where United is based and where it has one of its biggest hubs at O'Hare International Airport. The company employs about 84,000 people worldwide.

United's switch to a single passenger-information system last year caused problems with its website and frustrated some of its most lucrative customers when they couldn't get upgrades to first-class seats. Some of its customer service workers at airports struggled with new software on their computers, creating long lines.

Those problems drove potential customers away.

United wants to put those issues behind it and says the technology issues have been resolved solved.

But in an admission that United still needs to improve its interactions with travelers, Smisek said the airline has begun extra customer service training for ticket and gate agents, call center workers, and flight attendants worldwide. Leaders are getting the training this month, and workers worldwide will get the training by the end of this year, the CEO said. The company is labeling its new customer service standards, "It's our job."

United executives expressed confidence that the customer service training and good operating performance would win back travelers, especially the lucrative corporate customers that it prizes.

The fourth-quarter loss worked out to $1.87 per share. Excluding special items the loss would have been 58 cents per share, matching expectations of analysts surveyed by FactSet.

A year ago the company lost $138 million, or 42 cents per share.

Revenue fell 2.5 percent to $8.7 billion.

Over the past year, United's financial performance has been consistently worse than its main competitor, Delta Air Lines Inc. Delta routinely posts larger monthly gains in passenger revenue, and on Tuesday it posted a 2012 profit of $1billion.

United, meanwhile, lost $723 million for the year, almost wiping out its $840 million profit from 2011. Revenue for the full year ticked up slightly to $37.15 billion.

It said first-quarter flying capacity would fall as much as 5.1 percent compared to a year ago. For the full year it plans to cut flying by a half-percent.

Wall Street prizes what it calls "capacity discipline" because fewer seats mean airlines can charge more for the ones that it makes available to passengers.

"We see improvement this year and expect UAL to narrow the gap between itself and peers on revenue performance," S&P Capital IQ analyst Jim Corridore wrote in a note.

But he added that the company's "ongoing integration challenges keep us cautious on the shares, despite our positive view on the overall U.S. airline industry."

United shares rose 54 cents, or 2.1 percent, to close at $25.54, after setting a new 52-week high of $26.36 earlier. The shares have gained about 25 percent since Dec. 1 amid a strong rally in airline stocks.

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