United Cuts Flights to Four Cities

Sean1999 Ram Air TA · 10-23-2002, 09:13 PM

United Cuts Flights to Four Cities
Wednesday October 23, 5:50 pm ET
By DAVE CARPENTER, AP Business Writer
United Airlines Cuts Flights to 4 International Cities, Revises Loan Bid

CHICAGO (AP) -- United Airlines, battling to avoid bankruptcy, announced plans Wednesday to stop flying to four cities in Europe and South America and strengthened its application to the government for an urgently needed $1.8 billion federal loan guarantee.

The latest steps in its financial recovery effort came as United continued negotiating with its unions on the most critical element of its emergency overhaul plan: $5.8 billion in labor cost reductions.

In its second round of cost cuts this week, United said it would stop flying in January to Caracas, Venezuela; Santiago, Chile; Dusseldorf, Germany; and Milan, Italy, and switch to smaller aircraft on seven overseas routes.

The international cost-cutting will result in a combined 229 layoffs in those four cities and save an estimated $120 million annually, on top of $100 million in savings from U.S.-based reductions announced Monday, which included 1,250 job cuts.

"Closing a station is always an extremely difficult decision to make, but given the unprecedented challenges the global airline industry faces, these closings are an essential and prudent course of action," United CEO Glenn Tilton said. "These measures are unfortunately necessary given the continued deterioration of profitability in these four international markets."

The government filing drastically increases the cost-saving measures envisioned by the nation's No. 2 carrier beyond those outlined in its application in June, including an additional 12 percent reduction in capacity for 2003. Key elements of the plan had been announced previously.

United said it submitted the updated business plan Tuesday night to the Air Transportation Stabilization Board, which had signaled the earlier proposal was insufficient to receive the asked-for $1.8 billion loan guarantee.

It comes with United desperately seeking financial help and looking to restructure after reporting an $889 million quarterly loss last week. The airline, which had $1.66 billion in unrestricted cash at the end of September, faces $875 million in debt payments by Dec. 2 and has been burning through cash at a worsening rate that averaged $7 million a day in the third quarter.

Shares in United parent UAL Corp. rallied on the announcement of the government filing and closed up 24 cents, or 11 percent, to $2.34 on the New York Stock Exchange.

Airline analyst Ray Neidl of Blaylock & Partners said the package of cost cuts should be sufficient to keep the carrier from filing for Chapter 11 bankruptcy, provided the labor concessions gain final approval by its unions. Whether the three-man federal panel overseeing the loan guarantee process will approve remains in doubt, he said.

"The question is, is that enough dollars for the board to grant them the loan," he said. "The board is very conscious of protecting taxpayers' money, so I expect them to be put through the wringer."

United senior vice president Graham Atkinson said the four cities where it is halting flights have shown results "well below United's profitability hurdles" over several years.

As part of the latest reductions, the airline will now fly Boeing 767s instead of 777s in the Paris-Washington, Paris-San Francisco and Miami-Buenos Aires markets, and will replace 747s with 777s on the Osaka-San Francisco route, its second daily Seoul-Tokyo flight and its second Tokyo-Chicago flight.

United operates about 1,900 flights a day worldwide.

The carrier said the changes to its original application also include the targeted $5.8 billion in labor cuts over 5 1/2 years, non-labor savings of $1.4 billion annually plus a process for developing an additional $400 million in savings, and further reduction in 2003-05 capital spending of $1.2 billion.

United said it is working with its vendors, lessors and lenders on unspecified additional measures to improve its financial position.

The linchpin of the proposed restructuring, the $5.8 billion in labor concessions, still hinges on agreements to be worked out between United and its five unions. Chief financial officer Jake Brace said in a letter accompanying the revised application that the airline is in the process of negotiating bilateral contract amendments with the unions.

Brace called the agreement in principle with the unions "a significant breakthrough in United's efforts to reduce our cost structure and will allow United to compete effectively with our lower-cost competitors."

http://www.united.com

10-23-2002, 11:26 PM

Wowt thats a huge debet

Westjetter · 10-24-2002, 02:33 AM

Dude! Thats no good! United is in some serious trouble here!

10-23-2002, 09:13 PM	#1
Sean1999 Ram Air TA Senior Collector Join Date: Jan 2001 Location: Orlando, FL Posts: 249	United Cuts Flights to Four Cities United Cuts Flights to Four Cities Wednesday October 23, 5:50 pm ET By DAVE CARPENTER, AP Business Writer United Airlines Cuts Flights to 4 International Cities, Revises Loan Bid CHICAGO (AP) -- United Airlines, battling to avoid bankruptcy, announced plans Wednesday to stop flying to four cities in Europe and South America and strengthened its application to the government for an urgently needed $1.8 billion federal loan guarantee. The latest steps in its financial recovery effort came as United continued negotiating with its unions on the most critical element of its emergency overhaul plan: $5.8 billion in labor cost reductions. In its second round of cost cuts this week, United said it would stop flying in January to Caracas, Venezuela; Santiago, Chile; Dusseldorf, Germany; and Milan, Italy, and switch to smaller aircraft on seven overseas routes. The international cost-cutting will result in a combined 229 layoffs in those four cities and save an estimated $120 million annually, on top of $100 million in savings from U.S.-based reductions announced Monday, which included 1,250 job cuts. "Closing a station is always an extremely difficult decision to make, but given the unprecedented challenges the global airline industry faces, these closings are an essential and prudent course of action," United CEO Glenn Tilton said. "These measures are unfortunately necessary given the continued deterioration of profitability in these four international markets." The government filing drastically increases the cost-saving measures envisioned by the nation's No. 2 carrier beyond those outlined in its application in June, including an additional 12 percent reduction in capacity for 2003. Key elements of the plan had been announced previously. United said it submitted the updated business plan Tuesday night to the Air Transportation Stabilization Board, which had signaled the earlier proposal was insufficient to receive the asked-for $1.8 billion loan guarantee. It comes with United desperately seeking financial help and looking to restructure after reporting an $889 million quarterly loss last week. The airline, which had $1.66 billion in unrestricted cash at the end of September, faces $875 million in debt payments by Dec. 2 and has been burning through cash at a worsening rate that averaged $7 million a day in the third quarter. Shares in United parent UAL Corp. rallied on the announcement of the government filing and closed up 24 cents, or 11 percent, to $2.34 on the New York Stock Exchange. Airline analyst Ray Neidl of Blaylock & Partners said the package of cost cuts should be sufficient to keep the carrier from filing for Chapter 11 bankruptcy, provided the labor concessions gain final approval by its unions. Whether the three-man federal panel overseeing the loan guarantee process will approve remains in doubt, he said. "The question is, is that enough dollars for the board to grant them the loan," he said. "The board is very conscious of protecting taxpayers' money, so I expect them to be put through the wringer." United senior vice president Graham Atkinson said the four cities where it is halting flights have shown results "well below United's profitability hurdles" over several years. As part of the latest reductions, the airline will now fly Boeing 767s instead of 777s in the Paris-Washington, Paris-San Francisco and Miami-Buenos Aires markets, and will replace 747s with 777s on the Osaka-San Francisco route, its second daily Seoul-Tokyo flight and its second Tokyo-Chicago flight. United operates about 1,900 flights a day worldwide. The carrier said the changes to its original application also include the targeted $5.8 billion in labor cuts over 5 1/2 years, non-labor savings of $1.4 billion annually plus a process for developing an additional $400 million in savings, and further reduction in 2003-05 capital spending of $1.2 billion. United said it is working with its vendors, lessors and lenders on unspecified additional measures to improve its financial position. The linchpin of the proposed restructuring, the $5.8 billion in labor concessions, still hinges on agreements to be worked out between United and its five unions. Chief financial officer Jake Brace said in a letter accompanying the revised application that the airline is in the process of negotiating bilateral contract amendments with the unions. Brace called the agreement in principle with the unions "a significant breakthrough in United's efforts to reduce our cost structure and will allow United to compete effectively with our lower-cost competitors." http://www.united.com __________________ United Airlines Historian and Memorabilia Collector WAHS Member

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10-23-2002, 11:26 PM	#2
Romania is #1 Guest Posts: n/a	Wowt thats a huge debet

10-24-2002, 02:33 AM	#3
Westjetter Registered User Join Date: Mar 2002 Age: 27 Posts: 2,650	Dude! Thats no good! United is in some serious trouble here!