UAL reports $889 million loss
By James F. Peltz
Los Angeles Times
United Airlines parent UAL Corp. posted a massive third-quarter loss of $889 million yesterday, but said it was nearing a pact with its unions on employee concessions to help the carrier get a federally backed loan and fly clear of bankruptcy court.
However, some analysts maintained that United's effort will fall short, and that the nation's second-largest airline behind AMR Corp.'s American is still headed toward Chapter 11 proceedings. Their rationale: United will face a crippling cash crunch before it gets the loan.
United said it's working toward "quick resolution" with its five major unions on combined wage cuts and other concessions totaling $5.8 billion over five years. With the plan nearly in hand, United said it would file an amended application for the loan guarantee next week with the Air Transportation Stabilization Board, the federal panel overseeing the $15 billion bailout of the airlines that followed the Sept. 11 attacks.
The ATSB is demanding substantial concessions from airline workers, creditors and vendors before granting loan guarantees that might put U.S. taxpayers at risk if the airline defaults.
"At this point, nobody should consider a Chapter 11 filing inevitable," UAL Chairman Glenn Tilton said in a statement. Under Chapter 11, a firm keeps operating but its debts are frozen while it works out its restructuring.
But UAL did warn that the deep travel slump will leave the airline, based in Elk Grove Village, Ill., with "a significant fourth-quarter and full-year loss."
UAL's third-quarter loss, equal to $15.57 a share, narrowed from its loss of $1.16 billion, or $21.43 a share, a year earlier, when the attacks occurred. UAL's revenue tumbled 9 percent to $3.7 billion from $4.1 billion a year earlier.
Analyst Jim Higgins of Credit Suisse First Boston, who has a "sell" rating on UAL's battered stock, again said in a report to clients that UAL is likely headed toward bankruptcy. Though United has about $2 billion of cash, he noted that the airline faces nearly $1 billion of debt payments in coming weeks and is burning through $7 million of cash a day just as the airline industry is entering a seasonally slow period.
UAL's stock fell another two cents, to $1.71 a share, on the New York Stock Exchange. Wall Street values the entire airline at just $98 million, less than the price of new wide-body jetliner.
