- The Washington Times - Tuesday, December 10, 2002

The parent company of United Airlines filed for bankruptcy protection yesterday in a move certain to send financial reverberations through the airline industry and the economy.
United, the nation's second-largest airline and the biggest in America to ever file for bankruptcy protection, carries 38 percent of the passengers who fly out of Washington Dulles International Airport.
A federal judge in Chicago, where UAL Corp. filed for Chapter 11 bankruptcy protection, issued orders yesterday allowing the company to continue operating despite an $875 million debt payment due this week that is unlikely to be paid. Additional hearings will be used to determine a strategy to help the company survive its massive debts.
Passengers aren't likely to see any immediate effect on flights, according to both United and industry analysts. United promised to continue honoring its frequent-flier miles and to allow passengers to earn more miles during the restructuring.
But the filing could set in motion a restructuring of the entire industry as large carriers fly fewer routes with smaller planes to compete with low-cost rivals. That prospect hurt airline shares yesterday and unnerved investors, who sent the Dow Jones Industrial Average down 172.36, or 2 percent, to close at 8,473.41. UAL shares were unchanged at 93 cents after having traded at more than $100 a share in 1997.
United listed assets of $22.8 billion and debts of $21.2 billion. It operates about 1,700 daily flights, or 20 percent of all U.S. flights.
The court's judgments are expected to turn United into a much smaller airline, to redistribute some of its flights to other airlines and to continue the industry evolution toward business practices of low-cost carriers.
Dulles Airport is a prime candidate to share United's financial problems. It is United's only East Coast hub and the connecting airport to the industry's strongest network of European destinations. About 3,000 of its pilots, baggage handlers, flight attendants and other employees work out of the airport.
Some analysts say United's operations at Dulles are likely to be cut in bankruptcy because losing its relatively small property investment there would not severely hurt the company. Other industry insiders say United's cross-country and international network based at Dulles is too valuable to lose.
"They generate a much higher yield from Dulles than they do from San Francisco or Los Angeles," said Leo Schefer, president of the Washington Airports Task Force, an organization that promotes the region's airline service.
Dulles is the fifth-largest market in United's airport network, after Chicago, Denver, San Francisco and Los Angeles.
"United has what is one of the world's best international route systems," Mr. Schefer said. "That is one of their core strengths as an airline. In their restructuring, they will build on their core assets."
Tara Hamilton, Metropolitan Washington Airports Authority spokeswoman, said any predictions are premature.
"At this point, there's a lot that's yet to be known."
United operates 66 daily domestic flights and 99 weekly international flights out of Dulles. It flies 14 daily domestic flights out of Ronald Reagan Washington National Airport and 14 out of Baltimore-Washington International Airport.
United said bankruptcy filing was the only way to continue flying after two years of heavy losses. The Chapter 11 filing also was the nation's sixth-largest, as measured by assets. The suburban Chicago-based company has lost $4 billion in the past two years from a slumping economy, weak business strategies and the fallout from the September 11 attacks.
"Reorganization through Chapter 11 offers the best way to provide uninterrupted service to our customers around the world, safeguard the value of our businesses and assets and, ultimately, emerge as a stronger, healthier and more competitive airline," said Glenn Tilton, UAL Corp.'s chief executive officer.
He also said that $1.5 billion in debtor-in-possession financing that the company arranged through lending institutions last week would help ease its financial crunch.
United's attorneys said at the bankruptcy hearing that the airline was losing $20 million to $22 million a day and had $800 million in cash on hand.
Bankruptcy will come at a high price to United's 83,000 employees, who own 55 percent of the company. The bankruptcy court has the discretion of rescinding any labor agreements.
Refusal of the machinists union to grant wage concessions aggravated United's losses and appears to have contributed to the Air Transportation Stabilization Board's denial last week of a $1.8 billion federal loan guarantee. The guarantee would have meant the government would cover loans if United failed to repay them.

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