CHICAGO – United Airlines lost its third and final try for a government loan guarantee Monday when a federal board rejected its latest bid and insisted the bankrupt carrier can survive without one.
The announcement by the Air Transportation Stabilization Board, unanimously affirming its June 17 decision despite the reduced request United submitted last week, forces the airline to seek new financing and throws the outcome of its 11/2-year-old bankruptcy makeover into doubt.
It also is likely to delay United’s emergence from Chapter 11 into next year as the company looks for ways to further trim a cost structure that has kept it unprofitable since 2000.
Unions representing United’s 62,500 employees, faced with the prospect of more painful concessions on top of huge wage and benefit cutbacks already made, denounced the government decision and publicly urged the airline to look elsewhere besides the workforce for savings.
The company said it was in talks with lenders as it works to craft an alternative way out of bankruptcy.
Monday’s setback came in the form of a three-paragraph letter from the federal board to United chief financial officer Jake Brace. Just six days after United reduced the amount of the loan guarantee sought to $1.1 billion from $1.6 billion, the panel said its decision stands.
The board said it carefully considered the additional financial information provided by United but concluded again that a loan guarantee wasn’t necessary to ensure the viability of the nation’s aviation system, a requirement for receiving federal assistance.
It said it would not entertain any other United attempts to secure government backing.
The board again noted that the airline had taken positive steps to pare costs and strengthen its competitive standing. But the panel once again said that credit markets have improved since the Sept. 11, 2001, terrorist attacks, meaning the company has a chance of getting the financing it needs without federal assistance.
United said that while it disagreed with the decision, “We are gratified by the ATSB’s public recognition of our progress and are already moving forward to secure the exit financing we need to take United out of bankruptcy.”
Company executives were tight-lipped about the options they are pursuing, but there is no shortage of potential investors in an airline that has been filling more seats and delivering improved operational results.
The airline has said it needs about $2 billion to pay back the creditors who funded its bankruptcy restructuring and to emerge from Chapter 11. Citigroup and J.P. Morgan Chase agreed last year to provide that exit loan package if the government would guarantee much of it.
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