United stock falls to 40-year low
By Dave Carpenter
Associated Press
CHICAGO — United Airlines' stock fell to a 40-year low yesterday on escalating fears of bankruptcy as the company runs short of time to reach a cost-cutting agreement with its unions.
Analysts said the likelihood of a fall bankruptcy filing has increased as a result of new signs of labor resistance to steep cutbacks, including a statement by the machinists union that "cost reduction does not necessarily mean pay cuts."
Shares in United parent company UAL Corp. sank 11 cents to close at $1.76 on the New York Stock Exchange after dipping as low as $1.51. The closing price was the lowest since at least July 1962, according to University of Chicago researchers.
In a statement yesterday, United lauded its unions for working cooperatively and said it is progressing on its recovery efforts.
But at least two Wall Street analysts issued notes to investors saying the machinists' move to negotiate separately with United instead of acting within the all-union coalition signaled potentially critical snag in talks, even if the company and the unions disputed that.
"The apparent splintering of the union coalition lengthens the odds against United reaching agreement with labor in time to avoid a bankruptcy filing before large debt payments come due on Nov. 17 and Dec. 2," said Phillip Baggaley of Standard & Poor's Corp.
United said in August that it faced the prospect of a Chapter 11 bankruptcy filing if it were unable to reach agreement on cost cuts large enough to persuade the Air Transportation Stabilization Board to provide a $1.8 billion loan guarantee.
United's new CEO Glenn Tilton hasn't said publicly how much in cuts is needed, but he has said the $9 billion proposed by his predecessor was a "reasonable" figure. The union coalition proposed $5 billion in savings on Sept. 25, and the two sides have been in talks since then.
Jim Higgins of Credit Suisse First Boston sent a research note to investors yesterday saying "recent developments strengthen our conviction" that United will be unable to reach a restructuring plan in time to ward off bankruptcy.
