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UAL chiefs in talks on concessions
By Caroline Daniel in Chicago
Published: June 17 2004 3:38 | Last Updated: June 17 2004 3:38
United Airlines executives flew to Washington on Wednesday to negotiate last-minute concessions, which could include further cost cuts and finding a new equity investor, in an attempt to secure a critical federal $1.6bn loan guarantee.
The Airline Transportation Stabilisation Board, a three-man panel that oversees the loan guarantee system, was poised to vote as early as this week on United's application and was minded to turn it down amid fears that the airline's current plan did not put it on a sustainable footing, according to several people aware of the talks.
The loan guarantee is considered vital to United's efforts to emerge from bankruptcy this year.
One adviser said: "They [United officials] are in talks over conditions that could be attached to a loan approval, which might include cost cuts or bringing in private equity. They are negotiating about what the terms would need to be to get approval for a loan. They [the ATSB] are getting close to a board vote."
Glenn Tilton, chief executive, who cancelled a speech he was due to give in New York last night, and Jake Brace, finance director, met officials from the working party of the ATSB to discuss potential concessions. It was unclear when the ATSB board would decide.
Concern about the business plan has been triggered by the continued growth of low-cost carriers, by higher than expected fuel costs - which has added an additional $700m to United's costs this year - and by fears about whether United's current plan can generate enough cash to fund more than $4bn in unfunded pension obligations and repay the loan.
The ATSB board includes a representative from the Treasury, who is expected to vote against a guarantee. The Department of Transportation representative is expected to vote in favour. Ned Gramlich, the representative from the Federal Reserve, is widely regarded as the swing vote on United's application.
Mr Tilton said in an interview with the FT last week that United was introducing a hiring freeze and was cutting discretionary capital spending in an effort to conserve cash.
A decision by the board to say yes, but impose certain conditions, is seen as a politically pragmatic solution amid fears that saying no to United, the world's second-largest airline, in an election year could carry political risks for the administration.
United could not be reached for comment.
By Caroline Daniel in Chicago
Published: June 17 2004 3:38 | Last Updated: June 17 2004 3:38
United Airlines executives flew to Washington on Wednesday to negotiate last-minute concessions, which could include further cost cuts and finding a new equity investor, in an attempt to secure a critical federal $1.6bn loan guarantee.
The Airline Transportation Stabilisation Board, a three-man panel that oversees the loan guarantee system, was poised to vote as early as this week on United's application and was minded to turn it down amid fears that the airline's current plan did not put it on a sustainable footing, according to several people aware of the talks.
The loan guarantee is considered vital to United's efforts to emerge from bankruptcy this year.
One adviser said: "They [United officials] are in talks over conditions that could be attached to a loan approval, which might include cost cuts or bringing in private equity. They are negotiating about what the terms would need to be to get approval for a loan. They [the ATSB] are getting close to a board vote."
Glenn Tilton, chief executive, who cancelled a speech he was due to give in New York last night, and Jake Brace, finance director, met officials from the working party of the ATSB to discuss potential concessions. It was unclear when the ATSB board would decide.
Concern about the business plan has been triggered by the continued growth of low-cost carriers, by higher than expected fuel costs - which has added an additional $700m to United's costs this year - and by fears about whether United's current plan can generate enough cash to fund more than $4bn in unfunded pension obligations and repay the loan.
The ATSB board includes a representative from the Treasury, who is expected to vote against a guarantee. The Department of Transportation representative is expected to vote in favour. Ned Gramlich, the representative from the Federal Reserve, is widely regarded as the swing vote on United's application.
Mr Tilton said in an interview with the FT last week that United was introducing a hiring freeze and was cutting discretionary capital spending in an effort to conserve cash.
A decision by the board to say yes, but impose certain conditions, is seen as a politically pragmatic solution amid fears that saying no to United, the world's second-largest airline, in an election year could carry political risks for the administration.
United could not be reached for comment.
