United Airlines is still seeking the federal loan guarantee as it plans to leave court protection. The loan was rejected last year, pushing the carrier into its December bankruptcy filing.
The $1.8 billion guarantee, if granted, would help it secure private loans to emerge from Chapter 11 bankruptcy protection next spring, chief executive Glenn Tilton says. Although "there's no precise timeframe for exit", he says, the airline would like to emerge from bankruptcy in the spring. "We'd like to exit into a strong revenue environment, around the beginning of the travel season," he adds.
Tilton's comment signals another refinement of United's estimate for leaving bankruptcy. That is far ahead of the original target of mid-2004, but Tilton is intentionally vague, saying: "I have no intention of de-leveraging negotiations by giving somebody a timetable."
As part of its strategy, United still intends to launch a low-cost carrier, but Tilton sees it as smaller than the 35% of capacity earlier envisaged, in part because United's unions rejected a proposal for a separate payscale for the new airline. The revised labour contracts, which took effect on 1 May, cut annual labour costs by 36% or $2.56 billion a year over six years, but will not let the low-cost unit be as cost-competitive against discount rivals "as we might have imagined", Tilton says. But, he insists: "The low-cost carrier is not the centrepiece of our strategy. The centrepiece is about serving business travellers and their needs profitably."
To that end, it has revised the sequence for boarding passengers, with elite-level frequent flyers going first, and will expand its Verizone Airfone JetConnect service by year-end to include e-mail, becoming the first carrier to announce airborne e-mail on all domestic flights. In June 2001, United had signed on as a launch customer for Connexion by Boeing's broadband connectivity service, but shelved that original plan after the 11 September attacks.
Tilton says the airline is receiving "significant interest" from the debt and equity markets for exit financing, but declines to name interested parties. One possible backer, Texas Pacific group, has reportedly not decided if it will proceed with a possible investment in United, which in April was losing $12 million a day.
Tilton says the airline is "in the process of supplementing the application" it had made last year to the federal government's Air Transportation Stabilization Board, which would provide the bankruptcy exit financing United will need. Tilton insists that when United comes out of bankruptcy, it will be "fully transformed, not partially transformed".
DAVID FIELD WASHINGTON
Source: Airline Business
