ChicagoTribune Article/ I almost cannot beleive my eyes


Sep 12, 2002
hicago Tribune David Greising Column
   Sunday, November 24, 2002 12:47:25 PM ET

Nov 24, 2002 (Chicago Tribune - Knight Ridder/Tribune Business News) -- The government loan program that passed in those scary days after Sept. 11 is an easy target for criticism.
The program had the potential to become an unprecedented, direct bailout of an entire industry. It invited airlines to use taxpayer money to fix a host of ills that predated 9/11: costly management mistakes, greedy labor demands, unwieldy routes. The list goes on.
But let’s face it. Congress passed the program into law. Congress authorized up to $10 billion in guarantees.
And if a carrier such as United Airlines takes aggressive steps to cut costs and restore viability as the loan program demands, then the board should do what Congress wanted. It should hand over the money.
United is rapidly approaching that point.
It has cured the two biggest holes in the application it first filed in mid-June.
United last week locked in the latest of $5.5 billion in concessions from employees. And now it has proven that private-market sources of funding just simply are not available without government help.
Inexplicably, United had not made the latter case when it first filed for $1.8 billion in loan guarantees in June. Five long months later--five months during which United’s cash position has shrunk 33 percent to a tight $1.6 billion--the company finally has done that work.
Besides the many turndowns United does not want to talk about, it has restructured $500 million in debt with German lender Kreditanstalt fur Wiederaufbau. It has secured commitments toward $200 million in financial support from its global Star Alliance airline partners.
It is even in talks for $2 billion in debtor-in-possession financing--costly, just-in-case money United would use if forced into bankruptcy.
These are the signs of a company that has scoured the capital markets and come up with what little it could.
Add up the labor cuts, some scrounging for new capital and the debt talks, and United looks like an airline that has faced its dark prospects. And it still can see a future.
Now it needs the Transport Board’s help.
What the board does now will show if it is serious about fulfilling its congressional mandate.
If the Transport Board denies United’s application now, it may confirm suspicions of skeptics who fear the board is hewing more to conservative politics than to the save-the-airlines rhetoric President Bush dispensed when smoke still hung in the air of lower Manhattan.
David N. Skeel, a bankruptcy expert at the University of Pennsylvania law school, has published criticisms of the bailout program. But he now believes United’s case is persuasive in the context of the program Congress created.
If they don’t get the guarantees, you might suspect [the Transport Board] tried not to make it happen because their hearts weren’t in it in the first place, Skeel says.
The onus is on the board to reach its decision quickly--and produce the financing promptly, too, if that’s the decision. It shouldn’t repeat what happened with US Airways, allowing the company to slide into bankruptcy while it waited for the board to deliver on an approval it had already granted.
The Transport Board so far has been appropriately tough in its dealing with applicants. It scared off other carriers who might have applied if they thought easy money was within reach.
Now the board has to do similarly tough work: assessing United’s applications on its merits. It needs to discount the kibitzing of competitors whose self interest sometimes outweighs common sense. Its three members--representatives of the Transportation and Treasury Departments and the Federal Reserve--need to set politics aside and look at the facts.
There are some nits left to pick. The biggest: United’s guarantee that mechanics’ and pilots’ wages will return to pre-Sept. 11 levels by 2008. That could sink a recovering airline.
A $375 million loan payment looms Dec. 2. A bankruptcy could follow days later if no loan guarantee is in place.
United’s management and labor leaders have done their work and put together an estimable application.
It’s time for the Transport Board to do its job, too.
By David Greising To see more of the Chicago Tribune, or to subscribe to the newspaper, go to
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