United Airlines Files for Bankruptcy

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Last updated at: (Beijing Time) Monday, December 09, 2002

United Airlines Files for Bankruptcy

United Airlines, reeling from two years of heavy losses and unable to pay off nearly $1 billion in debt that comes due this week, filed for federal bankruptcy court protection Monday.

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United Airlines, reeling from two years of heavy losses and unable to pay off nearly $1 billion in debt that comes due this week, filed for federal bankruptcy court protection Monday.

The Chapter 11 filing in U.S. Bankruptcy Court in Chicago is by far the largest airline bankruptcy ever and one of the biggest in U.S. history. The suburban Chicago-based company has lost $4 billion in the last two years due to a slumping economy, flawed business strategies and last year's terrorist attacks.

The airline has promised to keep flying while it sheds costs under the auspices of a bankruptcy court judge and overhauls its business plan to try to become profitable again.

United operates about 1,700 flights a day, or about 20 percent of all U.S. flights. It has the most extensive worldwide route structure of any airline.

While the bankruptcy likely will have no immediate effect on passengers, protection from creditors will come at a steep price for the 83,000 employees who own 55 percent of the company. A bankruptcy court judge is almost certain to order wage and job cuts and could dissolve the employee stock ownership plan.

The board of directors of United's parent company, UAL Corp., voted unanimously Sunday night to authorize management to file for bankruptcy, a person familiar with the situation said. The move came as airline officials put final touches on $1.5 billion in debtor-in-possession financing, to be obtained from several banks.

A spokesman for United's pilots union urged passengers Sunday not to abandon the airline during a bankruptcy filing.

"We're going to be flying airplanes today, tomorrow, next week and next year," pilot Herb Hunter said.

"This is going to be painful for the stockholders and the employees, but the airline's going to keep flying and we're going to come out of this stronger," he said. "The passengers shouldn't notice any difference."

On pace to lose an industry-record $2.5 billion this year, United had pinned its last hopes of avoiding bankruptcy on getting federal backing for $1.8 billion of a $2 billion loan that banks wouldn't otherwise provide. But the Air Transportation Stabilization Board, created last year to help the airline industry recover after the Sept. 11 terrorist attacks, rejected United's request on Wednesday.

Source: agencies

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