CHICAGO (AP) - United Airlines appears headed for the largest bankruptcy filing in airline industry history.
The best chance the world's second-biggest carrier had to avoid a Chapter 11 filing vanished Wednesday when a government board rejected its bid for $1.8 billion in federal loan guarantees.
Chief executive Glenn Tilton tried to reassure passengers and United's 83,000 employees, saying the airline won't shut down. "Whatever course we chart, it should be emphatically clear that United will continue to fly," he said, without offering specifics.
But barring an unlikely turn of events, that course will almost certainly take it to federal bankruptcy court as soon as this week.
Cash-starved United has said for months that without government backing, it couldn't get the $2 billion private loan it needs to avoid bankruptcy. It faces $920 million in debt payments due next week, which would wipe out most of its fast-dwindling cash.
Investors and Wall Street see it as increasingly inevitable, driving the stock of United parent UAL Corp. down 56 percent in after-hours trading to $1.37 per share — the lowest level in decades.
Further sealing United's fate, its mechanics canceled a vote scheduled Thursday on $700 million in wage cuts the carrier said it needed immediately to stay out of bankruptcy. Union leaders said the panel's decision had rendered the vote moot.
United's unions assailed the decision by the government panel, which was created last year to help the financially strapped airline industry recover after the Sept. 11 terrorist attacks.
"We were ready to partner with United, the union coalition and the government to return United Airlines into the nation's premier carrier," said Tom Buffenbarger, president of the Machinists' union that represents the 13,000 mechanics and aircraft cleaners who were to have voted. "Unfortunately, the United States government walked out on that partnership."
United, the world's largest carrier until American Airlines overtook it last year, traces its problems to a decline in passengers because of the economy and the terrorist attacks, an increase in competition from smaller discount airlines and failed strategies. It has lost more than $4 billion since the middle of 2000 and is on pace for an industry-record loss exceeding $2 billion for the second straight year.
Business - AP
United Faces Ch. 11 After Loan Bid Loss
40 minutes ago Add Business - AP to My Yahoo!
By DAVE CARPENTER, AP Business Writer
CHICAGO (AP) - United Airlines appears headed for the largest bankruptcy filing in airline industry history.
AP Photo
Reuters
Slideshow: United Airlines
Related Quotes
AMR
UAL
DJIA
NASDAQ
^SPC
7.04
3.12
8737.85
1430.35
917.57
+0.18
+0.07
-5.08
-18.61
-3.17
delayed 20 mins - disclaimer
Quote Data provided by Reuters
The best chance the world's second-biggest carrier had to avoid a Chapter 11 filing vanished Wednesday when a government board rejected its bid for $1.8 billion in federal loan guarantees.
Chief executive Glenn Tilton tried to reassure passengers and United's 83,000 employees, saying the airline won't shut down. "Whatever course we chart, it should be emphatically clear that United will continue to fly," he said, without offering specifics.
But barring an unlikely turn of events, that course will almost certainly take it to federal bankruptcy court as soon as this week.
Cash-starved United has said for months that without government backing, it couldn't get the $2 billion private loan it needs to avoid bankruptcy. It faces $920 million in debt payments due next week, which would wipe out most of its fast-dwindling cash.
Investors and Wall Street see it as increasingly inevitable, driving the stock of United parent UAL Corp. down 56 percent in after-hours trading to $1.37 per share — the lowest level in decades.
Further sealing United's fate, its mechanics canceled a vote scheduled Thursday on $700 million in wage cuts the carrier said it needed immediately to stay out of bankruptcy. Union leaders said the panel's decision had rendered the vote moot.
United's unions assailed the decision by the government panel, which was created last year to help the financially strapped airline industry recover after the Sept. 11 terrorist attacks.
"We were ready to partner with United, the union coalition and the government to return United Airlines into the nation's premier carrier," said Tom Buffenbarger, president of the Machinists' union that represents the 13,000 mechanics and aircraft cleaners who were to have voted. "Unfortunately, the United States government walked out on that partnership."
United, the world's largest carrier until American Airlines overtook it last year, traces its problems to a decline in passengers because of the economy and the terrorist attacks, an increase in competition from smaller discount airlines and failed strategies. It has lost more than $4 billion since the middle of 2000 and is on pace for an industry-record loss exceeding $2 billion for the second straight year.
(Story continues after advertisement)
ADVERTISEMENT
The government board said that despite United's efforts to pare costs, including $5.2 billion in proposed labor cutbacks, "the business plan submitted by the company is not financially sound."
The board said United's plan "does not support the conclusion that there is a reasonable assurance of repayment and would pose an unacceptably high risk to U.S. taxpayers."
Tilton expressed disappointment but didn't say whether the company would file for bankruptcy or file a revised proposal.
"We appreciate, however, the possibility expressed to consider an improved proposal at a later date," he said. "We will consult with our union leaders and other stakeholders and quickly determine what step to take next."
Two of the three board members — Treasury's undersecretary for domestic finance, Peter Fisher, and Federal Reserve (news - web sites) Board member Edward Gramlich — rejected United's request. The third member, Kirk Van Tine, the general counsel of the Transportation Department, wanted to defer a decision until Dec. 9 to allow United to submit additional financial information.
"This is not just about costs; it's about a business plan that is fundamentally flawed," Fisher said.
The board's executive director, Daniel Montgomery, told reporters that United still has an opportunity to file a revised request with the board even if the airline were to file for bankruptcy.
The head of United's pilots union held out hope of avoiding a bankruptcy filing, although he did not specify how that might be accomplished.
"We will work very hard over the next few days with both the company and union coalition to evaluate the situation and respond as quickly as possible to achieve an out-of-court recovery for the company," said Paul Whiteford, head of the United pilots union.
In bankruptcy, United's stock shares would probably become virtually worthless and it would lose control of its restructuring to a judge. The airline is 55 percent owned by its employees.
A person familiar with United's situation said the airline was close to securing $1.5 billion debtor-in-possession financing that would be needed to keep it operating while in bankruptcy. The airline has been in negotiations with several banks organizing the loan, including J.P. Morgan, Bank One and GE Capital, a unit of General Electric, the source said, speaking on condition of anonymity.
Aaron Gellman, an airline industry expert and professor at Northwestern University's Transportation Center, said it was "highly likely" United would file for bankruptcy following the ruling. He said a last-minute cash source, such as a coalition of United's international partners in the Star Alliance and manufacturers, was improbable.
United's rivals lobbied furiously against its bid for government assistance. But some passengers flying United on Wednesday said the government should help it stay in business.
"We need the competition to keep the fares lower," said Courtney Burkholder, 31, of Lincoln, Neb., as she walked through Chicago's O'Hare International Airport. "Generally, it seems unfair that the airlines suffered for the terrorist attacks."
Only two major airlines, America West and US Airways, have gotten help from the board. But US Airways still ended up filing for bankruptcy protection in August.
Analysts say United will emerge from bankruptcy a smaller, changed airline, assuming it emerges at all.
"If they make peace with labor, they will come out of Chapter 11 stronger than they've ever been," said Darrell Jenkins, head of George Washington University's Aviation Institute. "If they have any travel disruptions due to labor unrest, then they become the next Eastern Airlines."
Posts: 73
By: skog - 5th December 2002 at 09:14
From AP:
CHICAGO (AP) - United Airlines appears headed for the largest bankruptcy filing in airline industry history.
The best chance the world's second-biggest carrier had to avoid a Chapter 11 filing vanished Wednesday when a government board rejected its bid for $1.8 billion in federal loan guarantees.
Chief executive Glenn Tilton tried to reassure passengers and United's 83,000 employees, saying the airline won't shut down. "Whatever course we chart, it should be emphatically clear that United will continue to fly," he said, without offering specifics.
But barring an unlikely turn of events, that course will almost certainly take it to federal bankruptcy court as soon as this week.
Cash-starved United has said for months that without government backing, it couldn't get the $2 billion private loan it needs to avoid bankruptcy. It faces $920 million in debt payments due next week, which would wipe out most of its fast-dwindling cash.
Investors and Wall Street see it as increasingly inevitable, driving the stock of United parent UAL Corp. down 56 percent in after-hours trading to $1.37 per share — the lowest level in decades.
Further sealing United's fate, its mechanics canceled a vote scheduled Thursday on $700 million in wage cuts the carrier said it needed immediately to stay out of bankruptcy. Union leaders said the panel's decision had rendered the vote moot.
United's unions assailed the decision by the government panel, which was created last year to help the financially strapped airline industry recover after the Sept. 11 terrorist attacks.
"We were ready to partner with United, the union coalition and the government to return United Airlines into the nation's premier carrier," said Tom Buffenbarger, president of the Machinists' union that represents the 13,000 mechanics and aircraft cleaners who were to have voted. "Unfortunately, the United States government walked out on that partnership."
United, the world's largest carrier until American Airlines overtook it last year, traces its problems to a decline in passengers because of the economy and the terrorist attacks, an increase in competition from smaller discount airlines and failed strategies. It has lost more than $4 billion since the middle of 2000 and is on pace for an industry-record loss exceeding $2 billion for the second straight year.
Business - AP
United Faces Ch. 11 After Loan Bid Loss
40 minutes ago Add Business - AP to My Yahoo!
By DAVE CARPENTER, AP Business Writer
CHICAGO (AP) - United Airlines appears headed for the largest bankruptcy filing in airline industry history.
AP Photo
Reuters
Slideshow: United Airlines
Related Quotes
AMR
UAL
DJIA
NASDAQ
^SPC
7.04
3.12
8737.85
1430.35
917.57
+0.18
+0.07
-5.08
-18.61
-3.17
delayed 20 mins - disclaimer
Quote Data provided by Reuters
The best chance the world's second-biggest carrier had to avoid a Chapter 11 filing vanished Wednesday when a government board rejected its bid for $1.8 billion in federal loan guarantees.
Chief executive Glenn Tilton tried to reassure passengers and United's 83,000 employees, saying the airline won't shut down. "Whatever course we chart, it should be emphatically clear that United will continue to fly," he said, without offering specifics.
But barring an unlikely turn of events, that course will almost certainly take it to federal bankruptcy court as soon as this week.
Cash-starved United has said for months that without government backing, it couldn't get the $2 billion private loan it needs to avoid bankruptcy. It faces $920 million in debt payments due next week, which would wipe out most of its fast-dwindling cash.
Investors and Wall Street see it as increasingly inevitable, driving the stock of United parent UAL Corp. down 56 percent in after-hours trading to $1.37 per share — the lowest level in decades.
Further sealing United's fate, its mechanics canceled a vote scheduled Thursday on $700 million in wage cuts the carrier said it needed immediately to stay out of bankruptcy. Union leaders said the panel's decision had rendered the vote moot.
United's unions assailed the decision by the government panel, which was created last year to help the financially strapped airline industry recover after the Sept. 11 terrorist attacks.
"We were ready to partner with United, the union coalition and the government to return United Airlines into the nation's premier carrier," said Tom Buffenbarger, president of the Machinists' union that represents the 13,000 mechanics and aircraft cleaners who were to have voted. "Unfortunately, the United States government walked out on that partnership."
United, the world's largest carrier until American Airlines overtook it last year, traces its problems to a decline in passengers because of the economy and the terrorist attacks, an increase in competition from smaller discount airlines and failed strategies. It has lost more than $4 billion since the middle of 2000 and is on pace for an industry-record loss exceeding $2 billion for the second straight year.
(Story continues after advertisement)
ADVERTISEMENT
The government board said that despite United's efforts to pare costs, including $5.2 billion in proposed labor cutbacks, "the business plan submitted by the company is not financially sound."
The board said United's plan "does not support the conclusion that there is a reasonable assurance of repayment and would pose an unacceptably high risk to U.S. taxpayers."
Tilton expressed disappointment but didn't say whether the company would file for bankruptcy or file a revised proposal.
"We appreciate, however, the possibility expressed to consider an improved proposal at a later date," he said. "We will consult with our union leaders and other stakeholders and quickly determine what step to take next."
Two of the three board members — Treasury's undersecretary for domestic finance, Peter Fisher, and Federal Reserve (news - web sites) Board member Edward Gramlich — rejected United's request. The third member, Kirk Van Tine, the general counsel of the Transportation Department, wanted to defer a decision until Dec. 9 to allow United to submit additional financial information.
"This is not just about costs; it's about a business plan that is fundamentally flawed," Fisher said.
The board's executive director, Daniel Montgomery, told reporters that United still has an opportunity to file a revised request with the board even if the airline were to file for bankruptcy.
The head of United's pilots union held out hope of avoiding a bankruptcy filing, although he did not specify how that might be accomplished.
"We will work very hard over the next few days with both the company and union coalition to evaluate the situation and respond as quickly as possible to achieve an out-of-court recovery for the company," said Paul Whiteford, head of the United pilots union.
In bankruptcy, United's stock shares would probably become virtually worthless and it would lose control of its restructuring to a judge. The airline is 55 percent owned by its employees.
A person familiar with United's situation said the airline was close to securing $1.5 billion debtor-in-possession financing that would be needed to keep it operating while in bankruptcy. The airline has been in negotiations with several banks organizing the loan, including J.P. Morgan, Bank One and GE Capital, a unit of General Electric, the source said, speaking on condition of anonymity.
Aaron Gellman, an airline industry expert and professor at Northwestern University's Transportation Center, said it was "highly likely" United would file for bankruptcy following the ruling. He said a last-minute cash source, such as a coalition of United's international partners in the Star Alliance and manufacturers, was improbable.
United's rivals lobbied furiously against its bid for government assistance. But some passengers flying United on Wednesday said the government should help it stay in business.
"We need the competition to keep the fares lower," said Courtney Burkholder, 31, of Lincoln, Neb., as she walked through Chicago's O'Hare International Airport. "Generally, it seems unfair that the airlines suffered for the terrorist attacks."
Only two major airlines, America West and US Airways, have gotten help from the board. But US Airways still ended up filing for bankruptcy protection in August.
Analysts say United will emerge from bankruptcy a smaller, changed airline, assuming it emerges at all.
"If they make peace with labor, they will come out of Chapter 11 stronger than they've ever been," said Darrell Jenkins, head of George Washington University's Aviation Institute. "If they have any travel disruptions due to labor unrest, then they become the next Eastern Airlines."
Eastern went under in 1989.