ASSOCIATED PRESS A passenger walked through Chicago's O'Hare International Airport today, passing United Airlines, America West and Continental jets parked on the tarmac.

United seeks cost
cuts from staff

If union agreements cannot
be reached, the carrier says it will
wind up in bankruptcy court

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By Dave Carpenter
Associated Press

CHICAGO >> United Airlines says it's in danger of flying to an undesirable new destination -- bankruptcy court -- as soon as this fall.

In an urgent bid to avoid it, the financially ailing carrier is imposing a one-month deadline to slash its top-heavy costs through agreements with its employee unions and business partners.

In case that effort fails, the nation's No. 2 carrier said yesterday, it is preparing to attempt the restructuring while under federal bankruptcy court protection.

"Our hope is to get our costs down on a collaborative basis," said Joe Hopkins, spokesman for the majority employee-owned airline. "If that doesn't work, we'll have to go to Chapter 11."

The bankruptcy threat sent shares in United parent UAL Corp. plummeting further today. The stock fell 36 cents, or 15 percent, to $2.09 in morning trading on the New York Stock Exchange after opening the week at $5.20.

Three U.S. carriers -- Midway Airlines, Vanguard Airlines and most recently US Airways -- have filed for bankruptcy since the Sept. 11 attacks drastically worsened the airline business. United, with 1,900 daily flights, 80,000 employees and an extensive worldwide route network, would be by far the biggest, although a filing doesn't mean it would stop flying.

A falloff in demand, industry-leading wage contracts, a sluggish economy and tough discount-fare competition all have contributed to a financial slide that began in 2000 for United.

The airline lost a record $2.1 billion last year and another $851 million in the first six months of 2002. Despite $2.7 billion in cash reserves, it continues to lose more than $1 million a day and faces an $875 million debt payment in the fourth quarter.

CEO Jack Creighton said the airline will in the coming days present new cost-saving proposals to employee representatives, leaseholders and vendors.

"The changes we need to make are urgent, significant and immediate," Creighton said in announcing the intensified recovery effort.

"Unless we lower our costs dramatically, filing for bankruptcy protection will be the only way we can ensure the company's future and the continued operation of our airline."

The announcement stepped up the pressure on unions that so far have balked at pay cuts United says are necessary to stem massive losses.

It also signals a final attempt to improve its chances of receiving a much-needed $1.8 billion government loan guarantee. United said it's been told its application will be rejected by the Air Transportation Stabilization Board without significantly more cost-cutting.

The warning came a day after American Airlines announced severe cutbacks, including 7,000 jobs. Any United layoffs, however, are to be negotiated with its unions.

Its pilots' union tentatively agreed to a 10 percent pay reduction earlier this summer, but other groups have rejected proposed pay cuts.

United's biggest union, the International Association of Machinists, said late yesterday it is ready to listen to new proposals. "We are concerned, however, that the company has yet to respond to cost-cutting suggestions from front-line employees at UAL," said Randy Canale and Scotty Ford, presidents of IAM Districts 141 and 141-M, in the joint statement.

By the numbers Some facts about United Airlines' Hawaii service: >> Flights: Averages more than 20 a day to Hawaii, bringing an average of 5,000 visitors a day. >> Employees: 1,576 workers in the islands. >> Destinations: Includes nonstop flights between Hawaii and Los Angeles, San Francisco, Denver and Narita, Japan. Source: United Airlines

Flight attendants, who also have declined pay-cut proposals, said they will consider a new United plan. But spokesman Jeff Zack of the Association of Flight Attendants said any new proposal must take into account that their pay is pegged to industry-average wages, unlike the industry-leading pay of other employee groups.

Denver-based airline consultant Michael Boyd said United's warning appeared to be a negotiating tactic, which he thinks is unlikely to work without it first hiring a new CEO with a clear plan to revive the airline. Creighton, who turns 70 next month, wants to step down when a replacement is found.

Airline analyst Ray Neidl said United could restructure without filing for bankruptcy.

"There's enough room, enough time, enough resources for them to get the airline in shape outside a Chapter 11 filing," said Neidl of Blaylock & Partners. "But they're letting everybody know this can't go on forever. If you're not going to get (employee) concessions, you might as well take it into Chapter 11."