GlueBall
19th Mar 2003, 13:00
Dow Jones Business News
United Airlines Hints at Liquidation in Filing
Tuesday March 18, 3:29 pm ET
By Sonoko Setaishi
NEW YORK -- United Airlines said liquidation is "a distinct possibility" for the world's second-largest carrier if it can't achieve its proposed labor-cost reductions.
In a motion filed late Monday with the U.S. Bankruptcy Court in Chicago that asks the judge to let the company void current labor contracts with its five unions, UAL said the potential liquidation of United would have "catastrophic" consequences for all of its stakeholders, particularly employees, all of whom would lose their jobs.
This appeared to be the first time United publicly acknowledged the possibility of its liquidation, although airline executives and analysts have fretted over the Chicago carrier's potential demise for months.
Operating under protection from creditors since December, UAL filed the motion so it can impose new terms on the employees that would sharply lower its expenses and boost labor productivity. The move increases pressure on the 64, 000 or so United employees as the two sides negotiate even deeper wage and benefit reductions to help the airline emerge from Chapter 11 bankruptcy-court protection.
An earlier round of temporary pay cuts, valued at $70 million a month, is due to expire on May 1, and UAL hopes to reach agreements with unions by then on new contracts that will result in $2.56 billion in annual labor savings for six years.
The possibility of liquidation is "the whole reason why we're trying to get these labor costs (reduced) permanently," said UAL spokesman Jeff Green. "That's why we are going to continue to negotiate with the unions even while the court process is going on. We still would like to do this collaboratively, versus in front of a judge."
In the 101-page document addressed to Chief Judge Eugene Wedoff, UAL also said it's seeking from its lenders relief from the stringent financing targets required for receiving $1.5 billion in interim financing because of a dramatic decline in passenger bookings in the wake of jitters over a likely war in Iraq.
Jake Brace, UAL's chief financial officer, will meet with representatives of the lenders of the debtor-in-possession financing this week to press United's case for immediate covenant relief.
Through the industry's main lobbying group, UAL is also asking for government aid on the industry, including assistance in paying for increased airport security.
"Securing some combination of covenant relief from its DIP lenders and financial assistance from the government is the company's first choice; asking this court to order more wage concessions from its hardworking employees is its last," the company said.
Without some loan relief or government aid to the entire industry by mid- April, the carrier said it may be forced to seek court approval to impose additional 9% wage reductions for three months beginning April 15.
United Airlines Hints at Liquidation in Filing
Tuesday March 18, 3:29 pm ET
By Sonoko Setaishi
NEW YORK -- United Airlines said liquidation is "a distinct possibility" for the world's second-largest carrier if it can't achieve its proposed labor-cost reductions.
In a motion filed late Monday with the U.S. Bankruptcy Court in Chicago that asks the judge to let the company void current labor contracts with its five unions, UAL said the potential liquidation of United would have "catastrophic" consequences for all of its stakeholders, particularly employees, all of whom would lose their jobs.
This appeared to be the first time United publicly acknowledged the possibility of its liquidation, although airline executives and analysts have fretted over the Chicago carrier's potential demise for months.
Operating under protection from creditors since December, UAL filed the motion so it can impose new terms on the employees that would sharply lower its expenses and boost labor productivity. The move increases pressure on the 64, 000 or so United employees as the two sides negotiate even deeper wage and benefit reductions to help the airline emerge from Chapter 11 bankruptcy-court protection.
An earlier round of temporary pay cuts, valued at $70 million a month, is due to expire on May 1, and UAL hopes to reach agreements with unions by then on new contracts that will result in $2.56 billion in annual labor savings for six years.
The possibility of liquidation is "the whole reason why we're trying to get these labor costs (reduced) permanently," said UAL spokesman Jeff Green. "That's why we are going to continue to negotiate with the unions even while the court process is going on. We still would like to do this collaboratively, versus in front of a judge."
In the 101-page document addressed to Chief Judge Eugene Wedoff, UAL also said it's seeking from its lenders relief from the stringent financing targets required for receiving $1.5 billion in interim financing because of a dramatic decline in passenger bookings in the wake of jitters over a likely war in Iraq.
Jake Brace, UAL's chief financial officer, will meet with representatives of the lenders of the debtor-in-possession financing this week to press United's case for immediate covenant relief.
Through the industry's main lobbying group, UAL is also asking for government aid on the industry, including assistance in paying for increased airport security.
"Securing some combination of covenant relief from its DIP lenders and financial assistance from the government is the company's first choice; asking this court to order more wage concessions from its hardworking employees is its last," the company said.
Without some loan relief or government aid to the entire industry by mid- April, the carrier said it may be forced to seek court approval to impose additional 9% wage reductions for three months beginning April 15.