UAL on the brink of a Chapter 11 filing:
United Board Meets As Bankruptcy Looms
By ERIC FIDLER
The Associated Press
CHICAGO (AP) - United Airlines planned a special Saturday session of its board of directors amid signs the nation's second-largest air carrier would file Chapter 11 bankruptcy soon.
The cash-strapped airline faces a debt payment of nearly $1 billion due next week, a federal panel rejected its request for a loan guarantee and shares in parent UAL Corp. fell 7 cents to close at 93 cents a share on the New York Stock Exchange Friday.
``We have been preparing for a Chapter 11 filing for months,'' CEO Glenn Tilton said in a recorded message to employees. ``Chapter 11 becomes a more likely outcome because it allows us to restructure and to continue to serve our customers while we do it.''
Spokesmen for United confirmed the board would meet Saturday - three days after the rejection of its request for a $1.8 billion federal loan guarantee - but would give no details about where, when or what was on the agenda.
Pilot union leaders held their second day of meetings and talked again with United managers, but refused to say whether they had discussed a possible attempt to avert bankruptcy.
Sources familiar with the process, who spoke on condition of anonymity, said United was preparing to file for Chapter 11 bankruptcy Sunday. The carrier was completing the terms of a $1.5 billion debtor-in-possession loan, the sources said. The loan would enable the airline to keep flying in bankruptcy.
The political fallout over Wednesday's decision by the federal Air Transportation Stabilization Board mounted, with political leaders as diverse as U.S. House Speaker Dennis Hastert and the Rev. Jesse Jackson denouncing the rejection.
``This is clearly a wrongheaded decision for our nation's economy on so many grounds,'' said Hastert, an Illinois Republican.
The three-member board ruled that United's financial plans were unsound and that a loan guarantee would be too risky for taxpayers.
Jackson, speaking before a news conference with Machinists union officials, said the decision was indicative of the Bush administration's anti-worker bias.
``It doesn't take much effort to see the good sense in working with this company and with labor to protect these workers,'' Jackson said.
Rich Michalski, the Machinists' legislative and political director, said the Bush administration wanted to drive down labor costs in the industry, but warned of what lower wages and benefits might produce.
``They want to get the cheapest mechanic, that is the position of this administration and George Bush,'' he said. ``Do you want to fly on an airplane that has the cheapest of everything?''
Tilton, former vice chairman of ChevronTexaco, has said the airline would continue to fly, whatever choice was made. United makes about 1,700 flights per day and has about 83,000 employees worldwide.
Aaron J. Gellman, a professor at Northwestern University's Transportation Center, said there was no reason for United not to file for bankruptcy and that it would probably emerge more competitive - and more attractive to top industry executives.
``They haven't been able to get competent airline executives to take the job of CEO,'' he said, noting the airline's employee-ownership arrangement gave the pilots too much power.
United, the world's largest airline until American overtook it last year, traces its problems to a drop in passengers because of the weak economy and the Sept. 11 terrorist attacks, an increase in competition from smaller discount airlines and failed business strategies.
AP Business Writer Brad Foss in New York contributed to this report.
On the Net:
United: united.com
12/07/02 08:31 EST
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