United CEO: Bankruptcy ''more likely''


Aug 19, 2002
CHICAGO (AP) — United Airlines'' CEO, headed into a weekend meeting with the company''s board of directors, warned employees Friday that a Chapter 11 bankruptcy filing by the nation''s No. 2 airline is more likely than ever.

Shares in parent UAL Corp. fell 7 cents to close at 93 cents a share on the New York Stock Exchange Friday — the second day of a selloff following the rejection of its request for a $1.8 billion loan guarantee.
The decision left the airline with few options as it faces a debt payment of nearly $1 billion due next week.
``We have been preparing for a Chapter 11 filing for months,'''' CEO Glenn Tilton said in a recorded message to employees. ``Chapter 11 becomes a more likely outcome because it allows us to restructure and to continue to serve our customers while we do it.''''
Pilot union leaders held their second day of meetings Friday and talked again with United managers, but refused to say whether they had discussed a possible attempt to avert bankruptcy.
United spokesman Rich Nelson confirmed Friday that the UAL board plans to meet on Saturday, but he otherwise declined comment on the airline''s financial status or plans.
Sources familiar with the process, who spoke on condition of anonymity, said United was preparing to file for Chapter 11 bankruptcy Sunday. The carrier was completing the terms of a $1.5 billion debtor-in-possession loan, the sources said. The loan would enable the airline to keep flying in bankruptcy.
The political fallout over Wednesday''s decision by the federal Air Transportation Stabilization Board mounted, with political leaders as diverse as U.S. House Speaker Dennis Hastert and the Rev. Jesse Jackson denouncing the rejection.
``This is clearly a wrongheaded decision for our nation''s economy on so many grounds,'''' said Hastert, an Illinois Republican.
The three-member board ruled that United''s financial plans were unsound and that a loan guarantee would be too risky for taxpayers.
Jackson, speaking before a news conference with Machinists union officials, said the decision was indicative of the Bush administration''s anti-worker bias.
``It doesn''t take much effort to see the good sense in working with this company and with labor to protect these workers,'''' Jackson said.
Rich Michalski, the Machinists'' legislative and political director, said the Bush administration wanted to drive down labor costs in the industry, but warned of what lower wages and benefits might produce.
``They want to get the cheapest mechanic, that is the position of this administration and George Bush,'''' he said. ``Do you want to fly on an airplane that has the cheapest of everything?''''
Tilton, former vice chairman of ChevronTexaco, has said the airline would continue to fly, whatever choice was made. United makes about 1,700 flights per day and has about 83,000 employees worldwide.
Aaron J. Gellman, a professor at Northwestern University''s Transportation Center, said there was no reason for United not to file for bankruptcy and that it would probably emerge more competitive — and more attractive to top industry executives.
``They haven''t been able to get competent airline executives to take the job of CEO,'''' he said. Gellman said that was because the airline''s employee-ownership arrangement gave the pilots too much power.
United, the world''s largest airline until American overtook it last year, traces its problems to a drop in passengers because of the weak economy and the Sept. 11 terrorist attacks, an increase in competition from smaller discount airlines and failed business strategies.
"Will the flight attendants please be seated. There is a report of a bit of rough air ahead." ..i.e. severe turbulence