United Seeks Bankruptcy Protection Airline Tries to Reassure Customers, Suppliers

"The pilots are going to want to work in a collaborative fashion to keep the company out of Chapter 7 and to get out of the current situation as fast as possible, even if that means something different from what was agreed to before. But to discuss specific numbers before we've been to the bargaining table doesn't make sense," said Paul Whiteford, head of United's pilots union. He was referring to Chapter 7 of the federal bankruptcy code, under which companies are liquidated.

Joe Tiberi, a spokesman for machinists union, declined to comment on concessions.

United has lined up $1.5 billion in financing to enable it to run, at least for a while, during the bankruptcy reorganization process. At the hearing, Eugene R. Wedoff, chief judge at the U.S. Bankruptcy Court of Northern District of Illinois, gave United permission to use about $800 million of the financing, which will become available in 11 days. United received loans from J.P. Morgan Chase & Co., Citigroup Inc., Bank One Corp. and CIT Group Inc. Yesterday, Deutsche Lufthansa AG said it was considering offering financial assistance to United as long it was "secured," said Lutfhansa spokesman Tom Tripp. Lufthansa and United are the biggest members of the Star Alliance of several airlines from around the world.

United said it has $1.4 billion in cash, of which $600 million cannot be easily accessed. At the end of September, United had $2 billion in cash, of which $340 million was restricted.

The next bankruptcy court hearing is scheduled for Dec. 30.

United's top 20 creditors have scheduled a meeting for Friday.

"This is liable to be a long, contentious and potentially difficult reorganization," said aviation analyst Philip Baggaley of Standard & Poor's Corp. One reason, said Baggaley, is that the airline failed to arrange for major cost cuts and secure additional financing before it filed.

In contrast, when Arlington-based US Airways filed for bankruptcy in August, it had obtained most of its $900 million in concessions from its employees and had a conditional loan guarantee from the federal government for $900 million. In addition, it had $500 million lined up in financing from outside lenders.

United has $1.5 billion in financing but no labor concessions and no federal loan guarantee. With the airline losing at least $20 million daily, its financing could be used up quickly, especially if the nation goes to war with Iraq or if there is an extremely cold winter, causing fuel prices to surge.

UAL has had nine straight quarterly losses, including a loss of $1.7 billion in the first three quarters of this year. It lost $2.1 billion in 2001. Profit started falling in 2000 as the carrier battled unions over new contracts and a proposed $12.5 billion purchase of US Airways. The government struck down the deal, saying it was anti-competitive.

Crucial to United's long-term survival will be its ability to cut costs and raise money. Analysts expect the airline to reduce the number of flights it makes between some cities and to sell some routes altogether.

A source close to United said flight reductions are likely in the coming months. Tilton agreed that there will be some reductions in operations, but he said they won't be made "anytime soon." Over the next few months, Tilton said, the airline will review its operations and routes and either downsize or eliminate those that aren't profitable.