Associated Press
CHICAGO — United Airlines chief executive James Goodwin warned the carrier "will perish" sometime next year if it cannot soon stem huge losses that have worsened dramatically since Sept. 11.
His comments came in a letter to employees, obtained Tuesday as United continues to slash its schedule and workforce to cope with the drastic decline in air travel caused by last month’s terrorist attacks.
"Before Sept. 11 we were not in a comfortable financial state, with costs exceeding our revenue on a daily basis," Goodwin wrote. "Today, the situation is exacerbated with costs exceeding revenues at four times the pre-September 11 rate. Today, we are literally hemorrhaging money.
"Clearly this bleeding has to be stopped — and soon — or United will perish sometime next year."
United spokesman Joe Hopkins said the letter, first reported earlier Tuesday by the industry publication Air Transport World, was written last week. He said it had not yet been distributed to employees and was leaked prematurely.
Even before the attacks, the nation’s second-largest airline was projected to lose $1 billion this year because of the economic slump, a falloff in business travel and lingering labor and service woes.
Last week, it said financial losses stemming from the attacks and subsequent grounding of its fleet probably will exceed the company’s share of aid coming from a federal bailout package — so far, $390 million of an expected $800 million.
Glenn Engel, an analyst for Goldman Sachs, said the airline industry is losing a combined $50 million a day even with a recent recovery in air travel. A lot of airlines could run out of cash before the end of 2002 without more improvements, he said, although they could still operate from bankruptcy while awaiting a turnaround.
"I’d be shocked if United perishes a year from now," he added.
Another analyst, Helane Becker of the Buckingham Research Group, said Goodwin’s scenario rings true and probably applies to every major U.S. airline.
"The numbers they’re going to report in this quarter are going to be ridiculously horrible," she said, estimating a $35-a-share loss for United parent UAL Corp. which would triple the amount of the second quarter, when losses totaled $605 million.
"They’ve lost billions of dollars and will lose billions more."
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