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Thursday, December 5, 2002



United stock
takes plunge

United's stock falls 67.63 percent
after its loan is turned down

Wall Street's worries about
bankruptcy spur a trading pause

Competitors stand to benefit


By Dave Carpenter
Associated Press

CHICAGO >> Shares of United Airlines' parent tumbled 67.63 percent today after being halted for most of the morning, a day after the world's second-largest carrier lost its request for government loan backing it said was needed to keep it out of bankruptcy.



United Air Lines

UAL in Hawaii

Flights: Average more than 20 a day to Hawaii, bringing about 5,000 visitors a day
Employees: 1,576 in the islands
Destinations: Include nonstop flights between Hawaii and Los Angeles, San Francisco, Denver and Narita, Japan



Amid heightened speculation on Wall Street that a bankruptcy filing may be imminent, the New York Stock Exchange had stopped trading in United parent UAL Corp.'s shares early today because of "news that's pending that could materially affect the trading of the stock," NYSE spokesman Ray Pellecchia said.

Before trading was stopped, UAL shares opened down $1.84, or 59 percent, to $1.28 -- their lowest level in more than 40 years. When trading resumed in the early afternoon, shares extended their decline and finished down $2.11 at $1.01.

Chief executive Glenn Tilton, following a meeting with leaders of the pilots' union that holds the largest single stake in the airline, declined to say whether United will file for bankruptcy but said it is not inevitable.

Asked whether bankruptcy is a foregone conclusion, Tilton told Chicago's WLS-TV: "No. What we have said is we're going to consider all of our options and nothing really is a foregone conclusion."

He also said passengers should not be fearful of bankruptcy: "We're going to be much better for this experience -- absolutely no doubt about it."

Analysts said the rejection of United's request for $1.8 billion in federal loan guarantees all but ensures a Chapter 11 bankruptcy filing. It would be the largest bankruptcy in airline industry history.

Standard & Poor's further downgraded United's corporate credit ratings, noting that nearly $1 billion in debt due next week already is considered in default.

Credit analyst Philip Baggaley cited the "disappearance of any realistic possibility" of paying it off and avoiding bankruptcy.

Tilton assured passengers and United's 83,000 employees late yesterday that "whatever course we chart, it should be emphatically clear that United will continue to fly."

Barring an unlikely turn of events, that course will almost certainly take it into federal bankruptcy court as soon as this week.

"We believe bankruptcy is inevitable," J.P. Morgan analyst Jamie Baker wrote in a note to investors today.

Analysts said the Air Transportation Stabilization Board's rejection of United's request for $1.8 billion in loan guarantees yesterday all but ensures a Chapter 11 bankruptcy filing.

Chief executive Glenn Tilton tried to reassure passengers and United's 83,000 employees, saying, "Whatever course we chart, it should be emphatically clear that United will continue to fly."

But barring a dramatic turn of events, that course will likely take it to federal bankruptcy court as soon as this week.

"We believe bankruptcy is inevitable," J.P. Morgan analyst Jamie Baker wrote in a note to investors today.

Cash-starved United has said for months that without government backing, it couldn't get the $2 billion private loan it needs to avoid bankruptcy. It faces $920 million in debt payments due next week.

Standard & Poor's further downgraded United's corporate credit ratings, noting that the debt due next week already is considered in default.

Further sealing United's fate, its mechanics canceled a vote scheduled for today on $700 million in wage cuts the carrier said it needed to stay out of bankruptcy.

Machinists union leaders said the board's decision had rendered the vote by 13,000 workers moot.

The airline's unions assailed the decision by the government panel, which was created last year to help the airline industry recover after Sept. 11.

"We were ready to partner with United, the union coalition and the government to return United Airlines into the nation's premier carrier," said Tom Buffenbarger, president of the Machinists' union. "Unfortunately, the United States government walked out on the partnership."



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