from BBC News online
United Airlines (UAL), the world’s second largest carrier, has filed for bankruptcy in a US court, marking the air travel sector’s biggest corporate collapse to date.
The move is designed to give the airline temporary protection from its creditors while it puts together a restructuring plan.
The cash-strapped airline had been expected to file for bankruptcy ever since last-ditch attempts to secure an emergency loan from the government fell through last week.
UAL’s collapse comes after last year’s 11 September attacks, together with a weaker economy, caused a sharp drop in passenger numbers, putting its finances under severe pressure.
Normal service
The company has reportedly landed a deal with its lenders, including CIT Group, JP Morgan Chase, Citibank and Bank One, which will provide the $1.5bn required to keep the company flying while a restructuring takes place.
Normal service to passengers will not be affected.
Last week, the firm’s application for a $1.8bn (£1.15bn) loan from the Air Transport Stabilisation Board (ATSB), set up to help US airlines in the wake of the 11 September attacks, was rejected.
UAL is 55% owned by staff, with representatives of its pilots and mechanics occupying seats on its board.
“We think that bankruptcy filing is probably the best thing that could happen to UAL,” said analysts at Deutsche Bank Securities earlier on Monday.
UAL has been seeking wage and benefit concessions from its staff in a bid to reduce its costs and mounting debt pile.
Rising debts
UAL lost $2.1bn last year and is expected to lose $2.5bn this year.
It has $920m in debt repayments due in the next week.
Last week, the group’s shares lost over two-thirds of their value following news of the loan rejection, ending the week at just 93 cents.
United Airlines’ is the second collapse in the US airline sector this year after US Airways filed for bankruptcy protection in August.
United chronology
March 1931: United Air Lines created
December 1993: Staff gain 53% ownership
May 2000: Strikes deal to buy US Airways
July 2001: Government blocks United/US Airways merger
September 2001: Terrorists crash United aircraft into World Trade Center and Pennsylvania field
September 2001: Announces plan to lay off 20,000 workers
February 2002: announces $2.1bn record loss
June 2002: Asks government backing for $1.8bn loan
October 2002: Share price falls to $1.42
December 2002: Officials reject $1.8bn plea
December 2002: United goes bankrupt
United Airlines – key facts
Headquarter: Elk Grove Village, Illinois
Hub airports: Chicago, Washington DC, San Francisco, Los Angeles
Staff: 83,000
Planned job cuts: 9,000
Daily flights: 1,800
Planes: 567
Earnings 2001: $16.1bn
Net loss 2001: $2.1bn
Net loss 2002: $1.74bn (to Sept)
By: mongu - 10th December 2002 at 18:44
RE: UA files for Bankruptcy
Juergen Weber, CEO of Lufthansa: “In the past we have seen a number of examples where airlines restructured themselves successfully under Chapter 11. I am convinced that our friends of United Airlines will succeed with their efforts too. This is why we are currently investigating how we – in addition to commercial measures already initiated – can assist United Airlines financially without any risk to Lufthansa.”
Source: Lufthansa.com, press release page.
The wording is classic PR rubbish – “no risk to Lufthansa” could mean anything. Best guess from me is that they will try to help operationally, provide cheap maintainance for UAL planes in Germany, undertake to honour UAL tix where possible (which IS a financial risk, but by the same token it reduces UAL’s liability) and possibly apply a bit of pressure to Airbus/Boeing etc. on deferring UAL deliveries. What do you think folks?
By: keltic - 10th December 2002 at 18:12
RE: UA files for Bankruptcy
And today, Lufthansa has just told that is eager to give massive loan to save his partner in Star. I am affraid if it would be a too big bit for LH to swallow. LH is not really rich.
By: wysiwyg - 10th December 2002 at 09:46
RE: UA files for Bankruptcy
The entire company was behind a self-rescue package with the exception of the ground engineers. They are very unpopular at the moment within United.
By: Hand87_5 - 10th December 2002 at 07:52
RE: UA files for Bankruptcy
Big salaries my dear. UA pilots have a mean salary of 850$/hour !!!!
+ bonuses.
I don’r dare to tell about their managers and CEO’s !!!.
Greed is themain reason of all of this:(
By: mongu - 9th December 2002 at 21:15
RE: UA files for Bankruptcy
If two “infidel” companies whose names form “United America” go bust, a certain bearded chap will break out in a big cheesy grin.
I don’t understand why the US carriers are unable to stop losing money – what is it in their business plans that is so very wrong?
By: keltic - 9th December 2002 at 20:09
RE: UA files for Bankruptcy
If it goes out of business, I am affraid Star will have the same fate than Qualiflyer. In any case, I have heard that AA is about to do the same.
By: mongu - 9th December 2002 at 18:18
RE: UA files for Bankruptcy
It’s bankruptcy Jim, but not as we know it.
The US chapter 11 system is nothing like the system the rest of the world uses. UAL may contine to trade, more or less noramlly, under c11.
By: Saab 2000 - 9th December 2002 at 16:28
RE: UA files for Bankruptcy
Very sad,although Chapter 11 does not mean the end.We now just have to wait and see what becomes of them.I don’t think it will be the end of them,hopefuly they will emerge a stronger yet leaner company.
his doesn’t mean they will fly into the history books as another Pan Am but more a Continental who had their problems,however,are still strong today.
By: KabirT - 9th December 2002 at 15:42
RE: UA files for Bankruptcy
sad….the B777 and B747 look the best in UA livery!
By: Hand87_5 - 9th December 2002 at 13:55
RE: UA files for Bankruptcy
The glory day of deep pockets and mismanagement>
Sign In
December 9, 2002 at 1:26 pm