ASSOCIATED PRESS
Frederic Brace, left, chief financial officer of United Airlines, Francesca Maher, and James Sprayregen, right, United's bankruptcy attorney, left U.S. Bankruptcy Court today.
United files CHICAGO >> United Airlines made the largest bankruptcy filing in aviation history today, saying it was the only way to keep the world's No. 2 airline flying after two years of losses.
for bankruptcy
The Chapter 11 filing is the aviation
United Airlines key facts
industry's largest ever, but the
airline vows to keep flying
Bankruptcy issues
By Dave Carpenter
Associated PressThe Chapter 11 filing was the sixth-largest ever, as measured by assets. The Chicago-based company has lost $4 billion in the last two years due to a slumping economy, flawed business strategies and the Sept. 11 attacks. It faced debt payments of $875 million later this week.
"We're in control of United's destiny," United CEO Glenn Tilton said. "We've made a good decision for United. It is in fact Chapter 1. ... This is a tremendous opportunity for United to transform this company and to emerge stronger than ever."
Tilton told customers and employees at O'Hare Airport that the carrier would keep flying. "We are now going to take this occasion to create a new beginning for United," he said.
Tilton said he expects the bankruptcy process to be completed within 18 months.
At a bankruptcy hearing at 7 a.m., Chief Judge Eugene R. Wedoff issued orders allowing United to keep operating until another hearing today when he is to issue further orders allowing it to continue its operations.
United said it obtained $1.5 billion in financing from several banks to continue operating, and had $800 million in cash.
An attorney for United, James Sprayregen, told the judge the company was losing $20 million to $22 million a day this month and needed to cut costs.
The company and a coalition of union leaders were scheduled to meet tomorrow to begin talks about reducing costs.
The airline has promised to keep flying while it sheds costs under the auspices of a bankruptcy judge. As of today's filing, United had assets of $22.8 billion and liabilities of $21.2 billion, the company said.
United operates about 1,700 flights a day, or about 20 percent of all U.S. flights. It has the most extensive worldwide route structure of any airline.
The bankruptcy filing will come at a steep price for the 83,000 employees who own 55 percent of the company. A bankruptcy court judge is almost certain to order wage and job cuts and could dissolve the employee stock ownership plan.
Two of United's unions, the Air Line Pilots Association and the Association of Flight Attendants, said both sides must work together to restructure.
The carrier's stock, which reached $100 a share in 1997, rose 10 cents to $1.03 a share in early afternoon trading today on the New York Stock Exchange.
Experts say frequent-flier miles and basic fare levels are likely to be retained for the short term, although fare hikes are likely over the longer haul.
A spokesman for United's pilots union urged passengers not to abandon the airline.
"This is going to be painful for the stockholders and the employees, but the airline's going to keep flying and we're going to come out of this stronger," pilot Herb Hunter said. "The passengers shouldn't notice any difference."
On pace to lose an industry-record $2.5 billion this year, United had pinned its last hopes of avoiding bankruptcy on getting federal backing for $1.8 billion of a $2 billion loan that banks wouldn't otherwise provide. But the Air Transportation Stabilization Board rejected United's request on Wednesday.
The linchpin to United's proposal was $5.2 billion in labor cutbacks by 2008, but the three-member federal panel said the airline's business plan was financially unsound and a loan guarantee would have risked U.S. taxpayers picking up the tab.
United already had lost about $1 billion since mid-2000 by the time of the Sept. 11 attacks because of labor turmoil, high costs and failed strategies.
United cut service and laid off nearly 20,000 workers after Sept. 11, but it hasn't come close to making up for revenue lost from the drop-off in business travel.
United's filing dwarfs all other airline bankruptcies. The previous largest was by Continental Airlines in 1990. United listed almost $25.4 billion in assets as of Sept. 30 -- more than twice Continental's when it filed.
It also is one of the 10 largest bankruptcies in U.S. history.
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United Airlines key facts
Following are some key facts about UAL Corp.'s United Airlines, the world's second-largest airline. United filed today for bankruptcy.Headquarters: Elk Grove Village, Illinois.
Hub airports: Chicago O'Hare, Denver, San Francisco, Los Angeles and Washington D.C.-Dulles.
Employees: About 83,000 as of Nov. 23. Expected to be 74,000 in 2004 under planned cuts announced in November from furloughs and attrition. Approximate numbers of employees in major groups include pilots (8,611), flight attendants (20,000), mechanics (11,981), reservations and gate agents (14,742), ramp service (9,341), salaried and management (10,577), international (5,000), other (724).
Flights: Nearly 1,800 flights daily worldwide.
Total jet aircraft: 567, including 310 leased and 257 owned in the mainline fleet.
2001 Operating revenue: About $16.1 billion.
2001 Net loss: $2.1 billion, the largest annual loss in airline history.
2002 Net loss through September: $1.74 billion.
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Bankruptcy issues
Questions and answers about United Airlines and Chapter 11 bankruptcy:Question: Why has United decided to file for bankruptcy?
Answer: It couldn't pay its bills after having posted losses totaling $4 billion in the past two years. It faced about $900 million in debt payments due this week. Under Chapter 11, it gets protection from those debts while it restructures in bankruptcy court.
Q: What does this mean for passengers?
A: There should be no immediate effect. United says it will keep flying throughout the bankruptcy process, which could take a year or more.
Q. What about the longer-term effect?
A: United may ground planes, drop service to some markets, eliminate unprofitable routes and reduce flights.
Q: Will frequent-flier miles be affected?
A: Experts say they probably are safe, although there are no legal guarantees.
Q: What will a bankruptcy court judge do?
A: He is certain to order a scaling back of wages, an overhaul of work rules and flight cutbacks, with United's management submitting proposals. A judge also could reshape United's board, hire new management and scrap the employee stock ownership plan, under which workers have 55 percent of the stock in United parent UAL Corp. and three seats on its board.
Q: What happens to UAL's stock?
A: The shares, which closed Friday at 93 cents a share, probably will become worthless or more diluted. They already have lost more than 99 percent of their value.
United Airlines
