United Seeks $1.8B Federal Loan Aid

DeltaFlot · 06-25-2002, 01:33 AM

United Seeks $1.8B Federal Loan Aid
Mon Jun 24, 4:31 PM ET
By DAVE CARPENTER, AP Business Writer

CHICAGO (AP) - United Airlines ( news - web sites) asked the government Monday for $1.8 billion in loan assistance, making it the biggest carrier yet to seek help from a loan guarantee program created to prop up the ailing industry after Sept. 11.

The nation's No. 2 airline, which has lost more than $2 billion since the attacks, is the third major carrier to seek federal guarantees, following America West ( news - web sites) and US Airways.

Elk Grove Village, Ill.-based United said it asked the Air Transportation Stabilization Board to back 90 percent of a $2 billion private loan.

Chairman and chief executive officer Jack Creighton called United "the perfect candidate" for the program, since it was a target of the attacks. Two of the four planes seized by terrorists were United's; one was flown into the World Trade Center and another crashed in rural Pennsylvania.

"We're now burdened by short-term financing needs that are driven by the aftermath of Sept. 11th and aggravated by the weak economic recovery," Creighton said. "While we continue to explore financing alternatives, we don't believe they will be sufficient because our access to the capital markets has been severely restricted."

Separately, United officials said they are close to a lucrative code-sharing agreement with US Airways. The code-sharing, in which airlines share one plane on a route using flight numbers for both carriers, would produce more than $200 million a year in revenues for United if approved by pilots.

The government made $10 billion in loan guarantees available to airlines that could meet stringent financial criteria as part of the airline bailout package approved by Congress last fall.

US Airways asked the government this month for $900 million in loan guarantees to avoid bankruptcy. America West Airlines of Phoenix received $429 million in guarantees in December.

Creighton had said United would apply if it got wage concessions from its workers, demonstrating to the government its commitment to return to financial stability. It has since ordered pay cuts for its 11,000 management and salaried employees, estimated at $430 million over three years, and reached a tentative pay-cut agreement with its 9,200 pilots worth another $520 million over three years.

He said Monday that United has a strong recovery plan under way. "But without a solution to our near-term funding requirements we will diminish our prospects for growth when the economy recovers."

Federal approval is far from assured.

Not only have mechanics and flight attendants at the majority employee-owned airline not agreed to cuts, United has been criticized within the industry for seeking government funds despite the fact it has been able to borrow money. Much of its trouble also dates to well before Sept. 11.

"What the hell does the taxpayer need to subsidize (an airline) for if the company can go out and get it" in capital markets, Continental Airlines ( news - web sites) chief Gordon Bethune asked in scathing remarks to an industry group in New York last week.

Some industry observers also suggest United is using the loan guarantee application to help win wage concessions. Along with US Airways, it has the industry's highest labor costs.

"This does put additional pressure on the unions to consider wage reductions, and it would give them additional liquidity to deal with any further weakening of the economy or possible terrorism," said independent airline analyst Ray Neidl. "The negative is that it is debt that's going to have to be serviced. It's going to raise their interest expense quite high."

United already has received more than $650 million in government compensation as part of the airline rescue package.

The carrier still hopes to broker a new wage agreement with its largest union, the International Association of Machinists and Aerospace Workers, representing 35,000 mechanics, aircraft cleaners, ramp workers and customer-service agents.

IAM spokesman Joe Tiberi said the union's financial specialists are still reviewing United's proposal for 10 percent pay cuts and other contract changes.

United had a whopping $2.9 billion cash and $3.4 billion in unencumbered aircraft as of March 31. But it has some impending financial obligations, including $1 billion in debt maturing by 2003.

In addition to wage cuts, the airline has reduced capital spending plans by $3 billion and cut operating expenses in an attempt to end a string of seven straight money-losing quarters.

Shares in United's parent company, UAL Corp., fell 25 cents to close at $11.70 on the New York Stock Exchange

06-25-2002, 01:33 AM	#1
DeltaFlot The Patriot Join Date: Jan 2001 Location: Laurel, MD Age: 36 Posts: 3,228	United Seeks $1.8B Federal Loan Aid United Seeks $1.8B Federal Loan Aid Mon Jun 24, 4:31 PM ET By DAVE CARPENTER, AP Business Writer CHICAGO (AP) - United Airlines ( news - web sites) asked the government Monday for $1.8 billion in loan assistance, making it the biggest carrier yet to seek help from a loan guarantee program created to prop up the ailing industry after Sept. 11. The nation's No. 2 airline, which has lost more than $2 billion since the attacks, is the third major carrier to seek federal guarantees, following America West ( news - web sites) and US Airways. Elk Grove Village, Ill.-based United said it asked the Air Transportation Stabilization Board to back 90 percent of a $2 billion private loan. Chairman and chief executive officer Jack Creighton called United "the perfect candidate" for the program, since it was a target of the attacks. Two of the four planes seized by terrorists were United's; one was flown into the World Trade Center and another crashed in rural Pennsylvania. "We're now burdened by short-term financing needs that are driven by the aftermath of Sept. 11th and aggravated by the weak economic recovery," Creighton said. "While we continue to explore financing alternatives, we don't believe they will be sufficient because our access to the capital markets has been severely restricted." Separately, United officials said they are close to a lucrative code-sharing agreement with US Airways. The code-sharing, in which airlines share one plane on a route using flight numbers for both carriers, would produce more than $200 million a year in revenues for United if approved by pilots. The government made $10 billion in loan guarantees available to airlines that could meet stringent financial criteria as part of the airline bailout package approved by Congress last fall. US Airways asked the government this month for $900 million in loan guarantees to avoid bankruptcy. America West Airlines of Phoenix received $429 million in guarantees in December. Creighton had said United would apply if it got wage concessions from its workers, demonstrating to the government its commitment to return to financial stability. It has since ordered pay cuts for its 11,000 management and salaried employees, estimated at $430 million over three years, and reached a tentative pay-cut agreement with its 9,200 pilots worth another $520 million over three years. He said Monday that United has a strong recovery plan under way. "But without a solution to our near-term funding requirements we will diminish our prospects for growth when the economy recovers." Federal approval is far from assured. Not only have mechanics and flight attendants at the majority employee-owned airline not agreed to cuts, United has been criticized within the industry for seeking government funds despite the fact it has been able to borrow money. Much of its trouble also dates to well before Sept. 11. "What the hell does the taxpayer need to subsidize (an airline) for if the company can go out and get it" in capital markets, Continental Airlines ( news - web sites) chief Gordon Bethune asked in scathing remarks to an industry group in New York last week. Some industry observers also suggest United is using the loan guarantee application to help win wage concessions. Along with US Airways, it has the industry's highest labor costs. "This does put additional pressure on the unions to consider wage reductions, and it would give them additional liquidity to deal with any further weakening of the economy or possible terrorism," said independent airline analyst Ray Neidl. "The negative is that it is debt that's going to have to be serviced. It's going to raise their interest expense quite high." United already has received more than $650 million in government compensation as part of the airline rescue package. The carrier still hopes to broker a new wage agreement with its largest union, the International Association of Machinists and Aerospace Workers, representing 35,000 mechanics, aircraft cleaners, ramp workers and customer-service agents. IAM spokesman Joe Tiberi said the union's financial specialists are still reviewing United's proposal for 10 percent pay cuts and other contract changes. United had a whopping $2.9 billion cash and $3.4 billion in unencumbered aircraft as of March 31. But it has some impending financial obligations, including $1 billion in debt maturing by 2003. In addition to wage cuts, the airline has reduced capital spending plans by $3 billion and cut operating expenses in an attempt to end a string of seven straight money-losing quarters. Shares in United's parent company, UAL Corp., fell 25 cents to close at $11.70 on the New York Stock Exchange __________________ Febuary 15, 1898 December 7, 1941 June 8, 1967 September 11, 2001 Never Forget, Never Forgive If you kick the Tiger in the arse, you better be able to deal with the Tiger's teeth.

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