November 23, 2002
UAL loan hunt gets political
By Julie Johnsson and Sandra Jones
With UAL Corp. just days away from a possible bankruptcy filing, its friends on Capitol Hill are stepping up political pressure on the Air
Transportation Stabilization Board to approve a $1.8-billion federal loan guarantee sought by the parent of United Airlines.
Nineteen members of the 22-member Illinois congressional delegation asked the board to resolve the matter quicklyâ€”and in UALâ€™s
favorâ€”in a letter sent Friday to David Montgomery, executive director of the Air Transportation Stabilization Board (ATSB).
Congressional members from other states where United has a major presence are also pressing for ATSBâ€™s approval.
The Illinois legislators, including House Speaker J. Dennis Hastert, R-Yorkville,
and Rep. William O. Lipinski, D-Chicago, â€œstrongly urgeâ€ the board to provide the
loan guarantee, saying it would help avert both a bankruptcy filing by United
and further economic damage in Illinois, where the air carrier employs 18,000.
Although President George W. Bush is copied on the Illinois letter, which was
drafted by Rep. Lipin-ski, the letter alone is unlikely to allay concerns held by
the three members of the independent board regarding UALâ€™s ability to find a
way out of its financial crisis.
The ATSB plans to meet again this week with representatives of the Elk Grove
Township-based airline, according to a source close to the board.
Spokespersons for both sides declined comment on the meeting and said there
is no timetable for resolving UALâ€™s application.
The nationâ€™s second-largest airline needs the $1.8-billion guarantee to secure a $2-billion private loan package aimed at avoiding
Chapter 11 bankruptcy. The airline has a $375-million loan payment due on Dec. 2. Without extra funding, the payment would bring
UALâ€™s cash holdings to less than $700 million, a level that industry analysts say is well below what the airline needs to continue
Currently, United is reportedly burning through $5 million to $7 million per day.
Nevertheless, the carrier is making headway in its turnaround efforts, having renegotiated some of its loans while announcing a total of
$5.4 billion in wage concessions from its unions. Crains Chicago Business 11/23/02