- The Washington Times - Tuesday, June 25, 2002

CHICAGO (AP) United Airlines asked the government yesterday for $1.8 billion in loan assistance. It is the biggest carrier yet to seek help from a loan guarantee program created to prop up the ailing industry after the September 11 terrorist attacks.

The nation's second-largest airline, which has lost more than $2 billion since the attacks, is the third major carrier to seek federal guarantees, following America West and US Airways.

Elk Grove Village, Ill.-based UAL Corp., parent company of United, said it asked the Air Transportation Stabilization Board to back 90 percent of a $2 billion private loan.

Chairman and Chief Executive Officer Jack Creighton called United "the perfect candidate" for the program because it was a target of the attacks. Two of the four planes seized by terrorists were United's; one was flown into the World Trade Center and another crashed in rural Pennsylvania.

"We're now burdened by short-term financing needs that are driven by the aftermath of September 11th and aggravated by the weak economic recovery," he said. "While we continue to explore financing alternatives, we don't believe they will be sufficient because our access to the capital markets has been severely restricted."

Separately, United officials said they are close to a lucrative code-sharing agreement with US Airways. The code sharing, in which airlines share one plane on a route using flight numbers for both carriers, would produce more than $200 million a year in revenue for United if approved by pilots.

The government made $10 billion in loan guarantees available to airlines that could meet stringent financial criteria as part of the airline bailout package approved by Congress in the fall.

US Airways asked the government this month for $900 million in loan guarantees to avoid bankruptcy. America West Airlines of Phoenix received $429 million in guarantees in December.

US Airways said yesterday it was deferring some payments to creditors and acknowledged that the move may force the airline into bankruptcy.

The airline said it was "implementing a strategic initiative involving the deferrals of selected payments" mainly on leases of aircraft that have been grounded and on selected older Boeing aircraft in service that may be taken out of service.

"We have taken this step as a prudent course of action while we seek to successfully complete a consensual restructuring plan outside of Chapter 11 reorganization," said President and CEO Dave Siegel.

But the company acknowledged the possibility that it may receive notices of default that could lead to cross-defaults under agreements with other lessors, vendors and creditors and eventually force the company into Chapter 11 bankruptcy reorganization.

Mr. Creighton had said United would apply for government help if it won wage concessions from its workers, demonstrating to the government its commitment to return to financial stability.

It has since ordered pay cuts for its 11,000 management and salaried employees, estimated at $430 million over three years, and reached a tentative pay-cut agreement with its 9,200 pilots worth another $520 million over three years.

He said yesterday that United has a strong recovery plan under way. "But without a solution to our near-term funding requirements, we will diminish our prospects for growth when the economy recovers."

Federal approval is far from assured.

Not only have mechanics and flight attendants at the majority employee-owned airline not agreed to cuts, but United has been criticized within the industry for seeking government funds despite the fact it has been able to borrow money. Much of its trouble dates to well before September 11.

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