United Airlines Slides Toward Bankruptcy
Dec. 06, 2002
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CHICAGO (AP) _ United Airlines' stock sank below a dollar share Friday as investors anticipated a Chapter 11 bankruptcy filing by the nation's No. 2 airline.
Shares in parent UAL Corp. fell 12 cents to 88 cents a share in morning trading on the New York Stock Exchange _ the second day of a selloff following the rejection of its request for a $1.8 billion loan guarantee.
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.
United spokesman Rich Nelson confirmed Friday that the UAL board plans to meet on Saturday, but he otherwise declined comment on the airline's financial status or plans.
Chief executive Glenn Tilton 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.
United's customers are uneasy, but many passengers seem willing to stick with the carrier.
Karen Hagler, who was flying from Denver to San Francisco, said she hoped United could stay afloat.
``I think we need the airlines we have. We need competition,'' she said.
Tony Singfield, traveling from Denver to Montana, said he flies United frequently but was worried about the attitude its employees would have in the face of possible layoffs.
``I've always had good service with United and I know that service will continue to be good, but the concern is just the attitude of the employees and how will they respond to the situation,'' he said.
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 September 2001 terrorist attacks, an increase in competition from smaller discount airlines and failed business strategies.
Many employees blame management.
``There is no business plan,'' said Mike Ommundson, a mechanic at Chicago's O'Hare International Airport.
``They brought in people with no airline experience'' to manage the company, he said. ``You have no respect for them.''
Other workers echoed his complaint, blaming executives for bringing in mid-level managers from retailers.
Like many other workers at United, Ommundson accepted wage cuts and work rule changes for six years in exchange for stock that would almost certainly be rendered worthless by a bankruptcy. The company is now 55 percent owned by its employees.
As recently as October 1997, UAL stock traded at $100 a share.
Other United workers said they worry about the possibility of layoffs and benefit cuts as well.
``We have to have a decent life and take care of our families,'' said Daniel Kaulback, a baggage handler at O'Hare.
Germany's Lufthansa, which along with United belongs to the 14-member Star Alliance of airlines, said Thursday it was in talks about offering assistance to its embattled partner.
Lufthansa would want to secure any possible investment with assets such as planes or real estate, said Thomas Jachnow, spokesman for Europe's No. 2 airline.
After the federal Air Transportation Stabilization Board rejected the loan guarantee Wednesday, United's mechanics canceled a vote Thursday on $700 million in wage-and-benefits cuts that the airline said were needed to avert bankruptcy.
Associated Press Writer Colleen Slevin in Denver and AP Business Writer Brad Foss in New York contributed to this report.
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