Bankruptcy fears heighten at United
chicagotribune.com
By Dave Carpenter
Associated Press
August 12, 2002, 11:20 AM CDT
CHICAGO -- Concern about United Airlines' shaky financial state intensified in the wake of US Airways' Chapter 11 bankruptcy filing, sending shares in United's parent company plummeting again.
Investor jitters that United may be the next carrier forced into bankruptcy prompted UAL Corp. stock to fall 81 cents, or 15.6 percent, to $4.39 a share in midday trading on the New York Stock Exchange after falling as much as 28 percent.
Other major airline stocks also took a hit, but none was battered as much as UAL, which already had lost more than half its value since the start of July and traded at $35 a share a year ago.
CEO Jack Creighton, who pledged after taking the top job last year not to preside over a bankruptcy, and other United officials have declined to discuss the prospects of a Chapter 11 filing.
"We continue to focus on our financial recovery program," spokesman Joe Hopkins said Monday.
In a message recorded for employees, Creighton said Sunday that United's focus is on trying to obtain the $1.8 billion federal loan guarantee the airline applied for in June. He indicated that recent talks with decision-makers in Washington suggest the application won't gain approval by the Air Transportation Stabilization Board without additional progress by United.
"From those conversations we've gotten the clear feeling that we need more participation from all of our stake-holders in our cost-cutting efforts," Creighton said. "They have indicated to us that participation must be broader, deeper and longer."
United's pilots have agreed to conditional wage cuts as part of the financial recovery plan, but mechanics and flight attendants have not. The Elk Grove Village, Ill.-based airline, which is trying to reduce its high operating costs, says the agreements are crucial to returning it to profitability.
Analysts say even the loan guarantee wouldn't assure that United can stay out of bankruptcy. The airline lost $851 million in the first six months of 2002, continues to burn through more than $1 million a day and has warned of substantial losses the rest of the year after a record $2.1 billion loss in 2001.
US Airways' bankruptcy filing came within weeks of its receiving a $900 million government loan guarantee.
"This is drawing a lot more attention to the fact that even with this loan guarantee program, it doesn't mean United would be saved," said Morningstar analyst Jonathan Schroeder.
"They have a lot more cash than US Airways and more resources they can draw upon," he said. "But they're still losing hundreds of millions of dollars, and they have some debt repayment (totaling $900 million) coming up in the fourth quarter."
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