By Ravin Robertson
United Airlines filed Chapter 11 for federal bankruptcy court protection Monday Dec. 9 after more than two years of financial losses and a denial of federal assistance.
'Filing for Chapter 11 is the means by which we can stem United''s continued losses and get our costs under control so we can transform our company into a more competitive airline,' said Glenn F. Tilton, chairman, president and chief executive officer of UAL, in a press release. 'Most importantly, throughout this process, customer safety will continue to be our number one priority. We have a solid record as a safe and reliable airline, and we intend to maintain and build upon that record.'
This filing is the largest aviation bankruptcy filed in U.S. history and the sixth largest of the nation''s top 10 bankruptcies, covering $22.8 billion in assets.
Despite filing Chapter 11, United officials say the world''s No. 2 carrier will be able to maintain its flights and services throughout the globe.
'United Airlines will continue to provide customers with the same experience and level of service they have come to expect,' Tilton said. 'We stand by our commitment to provide customers with convenient schedules, quality onboard services and the most extensive route network in the U.S. and abroad.'
United said it has lined up $1.5 billion in financing from several banks to continue operating in Chapter 11.
The bankruptcy filing will come at a steep price for the 83,000 employees who own 55 percent of the company. A federal bankruptcy judge is almost certain to order wage and job cuts, and could dissolve the employee stock ownership plan.
Pay cuts and wage reductions ranging from 2.8 percent for employees earning $30,000 or less, to 10.7 percent for the highest management employees, will take effect Dec. 16.
The airline had hoped to obtain a $1.8 billion federal loan guarantee, but the Air Transportation Stabilization Board, created to help the industry recover after Sept. 11, rejected United''s request last week as too risky for taxpayers.
Operating about 1,700 flights a day, or about 20 percent of all U.S. flights, United has the most extensive worldwide route structure of any airline, but also the industry''s highest costs.
United has lost $4 billion in the last two years because of the weak economy, flawed business strategies and fallout from the Sept. 11 attacks.