UAL Corp , parent of United Airlines, said on Friday it expected its consolidated passenger unit revenue to decline by 11 percent to 12 percent in the quarter and it would take an $80 million cash loss related to fuel hedge contracts that settled in the quarter.

At least one analyst said the unit revenue estimate was disappointing. UAL shares were down 11.4 percent to $4.60 in Friday afternoon trading on Nasdaq.

... we are lowering our first-quarter estimate to a loss of $4 from our prior estimate of a loss of $3.47 per share, said Helane Becker, airline analyst at Jesup & Lamont, in a research note.

The expected hedge loss is smaller than the amount UAL wrote off for hedges in the fourth quarter when the company reported a $370 million cash loss due to the recent fall in fuel prices. The company also suffered a noncash, net mark-to-market loss of $566 million on its hedges.

UAL and other carriers have taken large accounting losses related to fuel hedge programs as energy prices fell from their peaks last July.

Even Southwest Airlines , the low-cost airline whose thorough hedge strategy was once the envy of the industry, has taken accounting charges related to its fuel hedges.

Southwest has said it scaled back its hedges to cover less of its fuel needs over the next five years, to counter the effects of current relatively low oil prices.

Aside from volatile fuel, airlines have been hit by a weak economy that has eroded travel demand. To offset the weak demand, carriers have slashed capacity to support fares cut costs.

UAL repeated that it expects its consolidated capacity to be down 11.7 percent in the first quarter.

UAL said its mainline nonfuel unit costs, excluding some items, were expected to be up 1 percent to 1.5 percent in the first quarter, a smaller rise that previously forecast.

On a consolidated basis, which includes all UAL units, unit costs were seen up 1.5 percent to 2 percent for the quarter.

This compares with an earlier estimate for an increase of 4 percent to 5 percent for both mainline and consolidated operations.

The fact that United expects unit costs to increase only 1.5 to 2 percent, which is essentially 50 percent lower than the previous guidance, is quite impressive, said Morningstar airline analyst Basili Alukos.

Collapsing demand forced United to act, and it proved capable, he said. Soft demand will likely hurt revenue growth for the foreseeable future, so mitigating costs is imperative for United's survival.

The company said it expects its mainline fuel price, including the impact of cash settled hedges, to be $2.10 per gallon for the first quarter.

UAL said it expects to end the quarter with an unrestricted cash balance of $2.1 billion to $2.2 billion.

(Reporting by Kyle Peterson; editing by Jeffrey Benkoe and Tim Dobbyn)

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