UAL, the parent of United Airlines, lost $2.7 billion in the second quarter, mainly through non-cash charges to account for goodwill impairment.

Without those charges, the company would have lost $151 million anyway as fuel costs spiked $773 million beyond the previous year's second quarter expense, a 54 percent increase.

Total revenue increased 3 percent to $5.4 billion. Cargo revenue increased 30.9 percent to $237 million, a tiny percentage of the whole but a firm growth sector.

In an effort to stem the losses, the airline announced an alliance with Continental Airlines, further capacity cuts and the retirement of the entire B737 fleet as well as six B747s. In total, United will retire 100 aircraft and will reduce fourth-quarter mainline domestic capacity 15.5 percent to 16.5 percent year-over-year. In conjunction with the capacity reductions, the company expects to reduce its workforce by approximately 7,000 by year-end 2009.

"Our industry is challenged as never before by the unrelenting price of oil, and United is taking aggressive action to offset unprecedented fuel costs and to strengthen the competitiveness of our business," said Glenn Tilton, United president, chairman and CEO. "The elimination of our entire B737 fleet and our alliance with Continental are examples of the different approach we are taking to respond to dramatically changed market conditions to deliver better results for all our stakeholders."