United Files Chapter 11

UnitedChicago

Veteran
Aug 27, 2002
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www.usaviation.com
It''s official. I read last night that they have retained two high profile PR firms to help spin this. I hope they are aggressive in communicating with employees and customers.
Very sad day. Hang in there! I''ve said it numerous times - I will continue to be loyal!
United Airlines Files Chapter 11
By DAVE CARPENTER
.c The Associated Press
CHICAGO (AP) - United Airlines, reeling from two years of heavy losses and unable to pay off nearly $1 billion in debt that comes due this week, filed for federal bankruptcy court protection Monday.
The Chapter 11 filing in U.S. Bankruptcy Court in Chicago is by far the largest airline bankruptcy ever and one of the biggest in history. The suburban Chicago-based company has lost $4 billion in the last two years due to a slumping economy, flawed business strategies and last year''s terrorist attacks.
The airline has promised to keep flying while it sheds costs under the auspices of a bankruptcy court judge and overhauls its business plan to try to become profitable again.
United operates about 1,700 flights a day, or about 20 percent of all U.S. flights. It has the most extensive worldwide route structure of any airline.
While the bankruptcy likely will have no immediate effect on passengers, protection from creditors will come at a steep price for the 83,000 employees who own 55 percent of the company. A bankruptcy court judge is almost certain to order wage and job cuts and could dissolve the employee stock ownership plan.
The board of directors of United''s parent company, UAL Corp., voted unanimously Sunday night to authorize management to file for bankruptcy, a person familiar with the situation said. The move came as airline officials put final touches on $1.5 billion in loans from several banks that will enable the company to continue operations while restructuring.
A spokesman for United''s pilots union urged passengers Sunday not to abandon the airline during a bankruptcy filing.
``We''re going to be flying airplanes today, tomorrow, next week and next year,'''' pilot Herb Hunter said.
``This is going to be painful for the stockholders and the employees, but the airline''s going to keep flying and we''re going to come out of this stronger,'''' he said. ``The passengers shouldn''t notice any difference.''''
On pace to lose an industry-record $2.5 billion this year, United had pinned its last hopes of avoiding bankruptcy on getting federal backing for $1.8 billion of a $2 billion loan that banks wouldn''t otherwise provide. But the Air Transportation Stabilization Board, created last year to help the airline industry recover after the terrorist attacks, rejected United''s request last Wednesday.
The linchpin to United''s proposal was $5.2 billion in labor cutbacks by 2008, but the three-member federal panel said the airline''s business plan was financially unsound and a loan guarantee would have risked U.S. taxpayers picking up the tab.
United has struggled even more than other airlines during the industry''s worst-ever slump. The carrier already had lost about $1 billion since mid-2000 by the time of the attacks because of labor turmoil, the industry''s highest costs and several failed strategies, including a costly and time-consuming bid to acquire US Airways - itself now in Chapter 11 bankruptcy.
United cut service and laid off nearly 20,000 workers after the terrorist attacks, but it hasn''t come close to making up for revenue lost from the drop-off in business travel.
While trying to avoid bankruptcy, United had been making contingency plans for months in case it had to file.
United''s filing dwarfs all other airline bankruptcies. The previous largest was by Continental Airlines, which filed Chapter 11 in 1990. United listed almost $25.4 billion in assets as of Sept. 30 - more than twice Continental''s when it filed.
It is one of the ten largest bankruptcies in U.S. history - a list topped by the recent failures WorldCom and Enron. It is the 11th time a major U.S. airline has filed for bankruptcy since deregulation in 1978, including TWA three times.
A bankruptcy restructuring is likely to result in fewer flights, thousands of additional layoffs and extensive other cost-slashing under the supervision of a judge.
Frequent-flier miles and basic fare levels are likely to be retained for the short term, although fare hikes are likely over the longer haul.
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