United Airlines is seeking to reassure its most valued passengers -- its 40 million frequent fliers -- that service will be unaffected by the federal government's refusal to guarantee $1.1 billion in loans for the carrier.
In an e-mail to its frequent fliers late Tuesday night, United said: "The . . . decision will have no effect on our service to you. We are now moving forward to secure [bankruptcy] exit financing and emerge as a stronger, more competitive airline."
The Air Transportation Stabilization Board on Monday rejected United's request for a government guarantee on $1.1 billion of a $2 billion loan needed to emerge from bankruptcy.
Helane Becker, an analyst with the investment bank Benchmark Co., said she expects that United will have to cut more expenses to obtain financing. Besides asking employees for more concessions, the airline might have to reduce the number of its flights, she said. Any reduction in flights would mean fewer seats available to frequent fliers.
"They don't want their customers to worry," Becker said. "But on the other hand, they will have to make adjustments over time to their route structure. If they want to attract outside investors, they're going to have to make adjustments."
Blaylock & Partners analyst Raymond Neidl said United will have to cut some flights but probably not until the peak summer travel season ends. Neidl said he expects United to scale back a hub, probably in Denver, and turn it into a base for regional jet service.
United spokeswoman Jean Medina said speculation about cutting flights or routes was "premature." United adjusts its schedule based on passenger demand, she said. Medina also said United executives had begun conversations with potential investors.
United sent a similar e-mail to frequent fliers on Dec. 5, 2002, after the ATSB denied a request for $1.8 billion in loan guarantees. Less than a week later, the airline filed for Chapter 11 bankruptcy protection.
Randy Petersen, publisher of Inside Flyer magazine, said the latest e-mail was unnecessary because the most experienced frequent fliers have faith that United will sort out its difficulties and emerge from bankruptcy.
"The more seasoned fliers don't have time to read that kind of stuff," Petersen said. "If we're still with United by now, we're going to be with United."
Al Shpuntoff of Mountain View, Calif., who has more than 500,000 frequent-flier miles on United, said the e-mail was a "sign of life" from the airline's marketing department.
Michael E. Kurtz, a psychologist in Oak Hill, Va., complimented United for being "proactive" but said he expects service to decline, especially as the airline cuts costs to compete with budget carriers such as Southwest, JetBlue and Independence Air.
During its bankruptcy United has reduced costs by $5 billion, its workforce by 20,000 people and capacity by about 20 percent.
Kurtz, who frequently flies between Dulles (where United has a hub) and the West Coast, said he has noticed one cost-saving measure: The airline is flying smaller jets such as the Airbus A320 across the country rather than the larger Boeing 757 or 767.
"They're trying to make people feel better, but I don't think things will get better there," said Kurtz, who has 800,000 United frequent-flier miles.