CHICAGO, Dec 9: United Airlines filed for bankruptcy on Monday, the largest such case ever in the global airline industry, after high costs and low air fares left the world’s No. 2 carrier with too much debt and not enough cash.
United, a unit of UAL Corp., will continue to fly worldwide as it attempts to reorganize under protection from the US Bankruptcy Court in the Northern District of Illinois.
Judge Eugene Wedoff, chief of the bankruptcy court in Chicago, will preside over the huge bankruptcy case, which the airline said it hopes to complete within 18 months.
The airline stressed in a statement it will be “business as usual” for customers.
But for employees, suppliers and others, changes are in store, said Chief Executive Glenn Tilton.
“During the Chapter 11 process, we will go further and deeper in our efforts to reduce our costs,” he said. “We are developing a very compelling plan of reorganization that will enable us to successfully emerge as a stronger company with a competitive cost structure.”
United, with about 83,000 employees, had two of its Boeing jets commandeered in the devastating attacks on New York and Washington on Sept 11, 2001.
Since then it has posted nearly $4 billion in losses, with no end in sight to the red ink.
Another big US airline, Arlington, Virginia-based US Airways Group, filed for bankruptcy in August, and several smaller carriers have shut down altogether.
For United, which has a history of labour troubles and some of the highest wage costs in the industry, the downturn has also proved too difficult to navigate. The US government last week rejected the airline’s bid for federal loan guarantees, which had been its last hope for securing fresh capital.
The court filing has been widely expected and analysts generally predict a successful although lengthy court process.
“The odds clearly favour a reorganization, but that is by no means a foregone conclusion,” said Gary Chase, airline analyst at Lehman Brothers. “United and its employees and suppliers have to quickly address the company’s heavy cash burn in order to ensure a successful reorganization.”
Sources familiar with the situation said the government’s rejection, which angered unions and some politicians, came despite a last-minute offer of an additional $500 million in annual wage concessions by a group of unions.—Reuters