United's Opposition To A Loan Gaurantee

BigRed1

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Aug 30, 2002
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Wednesday June 2, 4:57 pm ET


WASHINGTON, June 2 /PRNewswire/ -- The Council for Citizens Against Government Waste (CCAGW) today urged the Air Transportation Stabilization Board (ATSB) to ground United Airlines' request of $1.6 billion in federally backed loans. As United attempts to emerge from bankruptcy later this summer, it has yet to establish a sound business plan, leaving taxpayers responsible to cover the costs of the loan if the company defaults. A recent statement submitted to the bankruptcy court indicates United will not survive for long without additional and dramatic changes in its practices.
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"When the House Aviation Subcommittee holds its hearing tomorrow on the financial condition of the airlines, members of Congress should pay heed to a recent statement by airline economist Daniel Kasper. His May 19 expert report and declaration to the United States Bankruptcy Court for the Northern District of Illinois Eastern Division stated, 'Notwithstanding the progress the Company has made over the past 18 months, United still needs to reduce its costs wherever possible -- including its retiree health costs -- if it hopes to compete successfully against both low cost and other full service airlines for the long term.' United Airlines is clearly not ready for prime-time flying," CCAGW President Tom Schatz said.

"Mr. Kasper's comments make it clear the company has not done enough to correct the problems that caused its bankruptcy in the first place. At the same time, United is telling the ATSB it is ready to emerge from bankruptcy and just needs a little help, like a $1.6 billion loan, to get back on its feet. Members of Congress should take advantage of this opportunity at tomorrow's hearing to question ATSB and make sure taxpayers are not left holding this carry-on bag," Schatz said.

According to the New York Times, United Airlines' operating costs are the second highest in the industry at 10.8 cents per seat per mile. Although the company reduced costs by 7 percent from 2001 to 2003, it still lags behind its competitors. Over the course of the last three years, United has lost almost $10 billion, including more than $3 billion while under bankruptcy protection during the last 16 months.

In December 2002, United was denied a similar request for a loan guarantee by ATSB because its business plan was found to be financially unsound and seriously flawed. The Board cited its responsibility to taxpayers as a major concern in deciding not to grant the loan.

"Nothing has changed since 2002 that is worth risking tax dollars, especially in a time of record federal budget deficits. ATSB needs to remember its past concern for taxpayers," Schatz concluded. "It is time for United to leave the taxpayers' nest and fly on its own. A loan would not solve United's problems. It would only provide the airline with an unfair business advantage, paid for by taxpayers, on a one-way ticket to further financial distress."

The Council for Citizens Against Government Waste is the lobbying arm of Citizens Against Government Waste, the nation's largest nonpartisan, nonprofit organization dedicated to eliminating waste, fraud, abuse, and mismanagement in government.
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Boy, this "press release" is awefully one-sided. Wonder which airlines are paying these people's salaries at the CCAGW.