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united airlines plunging..

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    Looking more and more like United Airlines is finished. This could put paid to the QAN/AIZ marriage (and assoiated premiums) or just cause more delays...

    United Airlines hurtles towards bankruptcy 6/12/02

    AAP News - 06.12.02 06:11

    US United Daylead

    WASHINGTON, Dec 5 AFP - United Airlines, the second-biggest United States airline, was plunging towards bankruptcy today, experts said, after the carrier failed to secure a government bailout.

    "We are working very hard at figuring out where we go next," said Jeff Green, spokesman for the airline parent, UAL Corp.

    The Air Transportation Stabilisation Board (ATSB), a panel set up to help the airline industry recover from the September 11 attacks, rejected a UAL bid for a $US1.8 billion ($A3.22 billion) loan guarantee yesterday, saying the recovery plan was not financially sound.

    UAL has almost one billion dollars in debt repayments due in the next eight days, and regular sources of credit closed to it.

    In the immediate aftermath of the ATSB rejection:

    -- UAL stock was suspended pending further information on Wall Street. It had plummeted 61 per cent before official trade began: down $1.91 at just $1.21. Experts said the stock, of which 55 per cent is held by United employees, would soon be worthless.

    -- United Airlines' machinists cancelled a vote on whether to accept a pay-cut, saying it was pointless after the administration's decision.

    President George W Bush backed the ATSB members' decision.

    "They have made their decision and the president respects it," Bush's spokesman Ari Fleischer told reporters.

    But workers were furious.

    "The ATSB has miserably failed its mandate of assisting distressed airlines," said International Association of Machinists and Aerospace Workers president Tom Buffenbarger.

    The machinists rejected a pay-cut proposal from management on November 28 but had been expected to reverse that decision in a fresh vote, now scrapped.

    "I am greatly disappointed in the president, the ATSB and all those who have turned their backs on United Airlines and its greatest asset -- their employees," Buffenbarger said.

    United Airlines flight attendants said the ATSB decision was irresponsible. Their union called on the board to reconsider.

    "If the denial of the loan guarantee forces United into bankruptcy reorganisation, the impact will be felt across the industry and in communities throughout the country," the Association of Flight Attendants said in a statement.

    But experts said the course was set for a Chapter 11 bankruptcy in which the airline continues to operate under the supervision of a judge while it reorganises.

    "As anticipated, the ATSB has rejected UAL's loan application, all but ensuring a Chapter 11 filing by the carrier in our view," said JP Morgan Securities analyst Jamie Baker.

    "We expect shares in UAL, currently at three dollars, to be essentially worthless by the end of the month."

    Despite the pain of bankruptcy, the process would produce dividends for the industry in the form of lower labour, borrowing, and aircraft costs, however, he said.

    "Make no mistake, a successful reorganisation of UAL benefits the entire industry."

    The ATSB, the panel set up to handle the federal government's bailout of the US airline industry after the blow of September 11, said United Airline's revival plan was "fundamentally flawed."

    "Specifically, the plan is based on unreasonably optimistic revenue projections," it said, voting two to one to reject the loan guarantee.

    UAL had already embarked on a broad restructuring plan which called for 26,000 layoffs and a 23 per cent cut in capacity.

    In recent weeks, it had scrambled furiously to nail down the remaining elements of a recovery plan, promising $US14.1 billion

    ($A25.2 billion) in savings over five and a half years, with the goal of returning the company to profitability by 2004.

    As part of that plan, most of the company's unions had signed off on $US5.2 billion ($A9.3 billion) in pay cuts in return for profit sharing down the road.


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