CEO says government likely to reject
United’s $1.8 billion loan guarantee
CHICAGO — The stocks of major airlines fell sharply Monday and there was growing concern that United Airlines, the nation’s second-largest carrier, could follow US Airways into bankruptcy.
Shares of United parent UAL Corp., which have already had lost more than half their value since the start of July, sank another 27 percent to close at $3.80 on the New York Stock Exchange. They traded at $35 a year ago.
United has more than $2 billion in cash reserves, more aircraft than US Airways and a superior route system. But high costs, daily losses exceeding $1 million and lingering fallout from the Sept. 11 attacks threaten the same fate for United as its smaller rival if its recovery plan doesn’t take off soon.
Without significant changes, analysts said, United could file for bankruptcy by the end of the year. Like US Airways, the majority employee-owned airline would likely continue to operate while reorganizing its operations.
United’s labor costs are among the industry’s highest and the carrier wants to roll back some of the hefty raises it negotiated recently.
“The way things are going, particularly with the unions, I think United is decidedly on the way toward Chapter 11,” said veteran industry observer David Field, Americas editor for Airline Business magazine.
United officials have declined to discuss the prospects of a Chapter 11 filing. But interim CEO Jack Creighton told United employees Sunday that the government appears likely to reject the company’s application for a $1.8 billion loan guarantee, which it considers key to its ability to compete in a struggling market.