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United files for federal help
World's No. 2 airline asks for $1.8B in loan guarantees, citing continuing losses.
June 24, 2002: 2:23 PM EDT

NEW YORK (CNN/Money) - UAL Corp.'s United Airlines, the world's No. 2 air carrier, asked the federal government Monday for $1.8 billion in loan guarantees, the largest request of any airline since the Sept. 11 terrorist attacks slashed demand for air travel.

The filing, which had been expected since statements by airline executives last month after the company's shareholder meeting, was made to the Air Transportation Stabilization Board, the federal agency set up after the attacks to bail out the struggling industry.

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"We're now burdened by short-term financing needs that are driven by the aftermath of September 11 and are aggravated by the weak economic recovery," said CEO Jack Creighton said.

United won wage concessions of about 10 percent from its pilots union last week. The union's members own about a 25 percent stake in the employee-owned carrier. Nonunion employees also face a 5 percent pay cut. Other unions have yet to negotiate new wage agreements with the carrier, although Creighton had earlier said it needed to win concessions from a "substantial" portion of the company's employees to file for the loan guarantees.

One of the factors weighed by ATSB when considering loan guarantees has been some form of savings from employees and suppliers. Another is a granting of equity in the company to the federal government.

Of major carriers, only America West Holdings (AWA: down $0.12 to $2.96, Research, Estimates), the nation's No. 8 carrier, has applied for and been granted guarantees. US Airways Group (U: down $0.29 to $3.59, Research, Estimates), the No. 7 carrier, has also applied for loan guarantees.

Granting of the guarantees is by no means assured under the airline rescue legislation. The three-member board voted only 2 to 1 in favor of the America West guarantee request.

Click here for a look at airline stocks

Shares of UAL Corp. (UAL: down $0.45 to $11.50, Research, Estimates) were down about 4 percent early Monday afternoon.  Top of page






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