UAL Corp., the parent of financially struggling United Airlines, yesterday unveiled a restructuring plan that includes eliminating 9,000 jobs, reducing the number of cities and flight frequencies by 6 percent, and slashing its capital spending by about $2 billion.
The moves are part of United's effort to assure the federal government that it would be able to repay $1.8 billion in loan guarantees. The nation's second largest airline also said it planned to report an operating profit for 2004, which would be the airline's first operating profit since 2000.
United's executives have said the airline would have to file for Chapter 11 bankruptcy protection if it did not receive the loan guarantees.
The restructuring details were submitted to the Air Transportation Stabilization Board, which oversees the loan guarantee program. If United obtains the guarantees, it would be the largest amount granted to an airline since Congress created a financial aid package for the ailing industry after the Sept. 11, 2001, terrorist attacks.
United also said it would retire 49 aircraft and would defer all large-body jet deliveries to 2005. The airline said it had obtained more than $1.5 billion in capital deferrals from aircraft manufacturers and suppliers, including a $500 million deferral that the airline obtained earlier this month from a German bank.
The Chicago-based company said it plans to reduce its capital spending to $$450 million in 2003 and $400 million in 2004. The airline's capital spending averages about $2.4 billion a year.
The company also plans to add 109 regional jets to its United Express operations. The planes will replace smaller turboprop planes as well money-losing large planes on less profitable routes.
Glenn F. Tilton, United's chairman, president and chief executive, said employees and executives were "involved in an extraordinary process at United, addressing our immediate-term financial issues and fundamentally transforming our business."
United's five labor unions already have agreed to $5.8 billion in pay and work-rule concessions over 51/2 years.
The airline has promised that it would begin repaying any loans guaranteed from the Air Transportation Stabilization Board by 2005 and to have the loans paid off by 2007.
Since the terrorist attacks, United has reduced its operations by 23 percent and eliminated more than 17,000 jobs. A United spokesman said the airline expected to obtain the additional 9,000 job cuts through attrition and early retirements.
The airline has two unions with which to finalize concessions talks. One of the unions, the mechanics, is the airline's largest and one of the most influential employee groups. Employees own 55 percent of the airline.
The airline, which lost $2.15 billion in 2001, is losing $9 million to $11 million a day, Wall Street analysts say. The airline is also facing a $375 million debt payment that will deplete much of the airline's cash and could further weaken the airline's financial position.
The shares of UAL closed Friday at $2.95, down 17 cents, on the New York Stock Exchange. For the year, the stock is down 79 percent.