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United Airlines may file for bankruptcy in Q4
Washington, Aug 15: The beleagured United Airlines, the second largest US carrier, has said it may be forced to seek bankruptcy protection unless the company succeeded in cutting costs dramatically.
Washington, Aug 15: The beleagured United Airlines, the second largest US carrier, has said it may be forced to seek bankruptcy protection unless the company succeeded in cutting costs dramatically.
"Unless we lower our costs dramatically, filing for bankruptcy protection will be the only way we can ensure the company's future and the continued operation of our airline," Jack Creighton, United's chairman and CEO, said in a statement. "The world has changed," he said.
"Demand isn't returning, fares remain low, and the industry is grappling with how to respond," Creighton added.
The parent company of United Airlines, UAL Corp, has given itself a month's time to negotiate with staff to restructure the airline around a new business plan that includes massive job and salary cuts.
The airlines may approach bankruptcy protection court in the fourth quarter due to pending debt payments following sluggish returns in the business after September 11 terror attacks.
The announcement comes three days after US Airways, the seventh largest airline in the US, filed for bankruptcy protection.
United lost a record $2.1 billion last year and another $851 million during the first six months of 2002. It has $875 million in debt payments due in the fourth quarter and insufficient access to capital marlet to cover the payments.
United has also asked for loan guarantees from the government. Creighton, however, told employees last week that its application may be rejected without more evidence of cost-cutting.
"At United, we have determined that we must make improvements in our business plan to ensure we get the cost savings we need to compete in an industry that has fundamentally changed," he said.
"The changes we need to make are urgent, significant and immediate," he added.
Creighton said, "We've gotten the clear feeling that we need more participation from all our stakeholders in our cost-cutting efforts."
The airline, 55 per cent owned by employees, want 10 per cent wage cuts in return for shares and promise of future wage rises. So far, only pilots have agreed to the proposal.
On Monday US Airways, the sixth biggest carrier in the US, filed for bankruptcy protections and the nextday American Airlines announced 7,000 job cuts and scrapping plane orders in a cost-sutting drive. Bureau Report
"Unless we lower our costs dramatically, filing for bankruptcy protection will be the only way we can ensure the company's future and the continued operation of our airline," Jack Creighton, United's chairman and CEO, said in a statement. "The world has changed," he said.
"Demand isn't returning, fares remain low, and the industry is grappling with how to respond," Creighton added.
The parent company of United Airlines, UAL Corp, has given itself a month's time to negotiate with staff to restructure the airline around a new business plan that includes massive job and salary cuts.
The airlines may approach bankruptcy protection court in the fourth quarter due to pending debt payments following sluggish returns in the business after September 11 terror attacks.
The announcement comes three days after US Airways, the seventh largest airline in the US, filed for bankruptcy protection.
United lost a record $2.1 billion last year and another $851 million during the first six months of 2002. It has $875 million in debt payments due in the fourth quarter and insufficient access to capital marlet to cover the payments.
United has also asked for loan guarantees from the government. Creighton, however, told employees last week that its application may be rejected without more evidence of cost-cutting.
"At United, we have determined that we must make improvements in our business plan to ensure we get the cost savings we need to compete in an industry that has fundamentally changed," he said.
"The changes we need to make are urgent, significant and immediate," he added.
Creighton said, "We've gotten the clear feeling that we need more participation from all our stakeholders in our cost-cutting efforts."
The airline, 55 per cent owned by employees, want 10 per cent wage cuts in return for shares and promise of future wage rises. So far, only pilots have agreed to the proposal.
On Monday US Airways, the sixth biggest carrier in the US, filed for bankruptcy protections and the nextday American Airlines announced 7,000 job cuts and scrapping plane orders in a cost-sutting drive. Bureau Report