- The Washington Times - Saturday, November 30, 2002

CHICAGO (AP) United Airlines' stock lost more than a quarter of its value yesterday on investor fears that a labor-vote setback has dashed its efforts to avoid a Chapter 11 bankruptcy filing.
Shares in United parent company UAL Corp. dropped $1.18, or 33 percent, to close at $2.45 in a heavy sell-off during shortened holiday hours on the New York Stock Exchange. More than 21 million shares were traded, six times the average daily volume, and at one point the stock sank as low as $1.72, not far off the more than four-decade low of $1.42 reached last month.
After United machinists' rejection Wednesday of pay cuts that are a key element of its multibillion-dollar financial recovery plan, Standard & Poor's slashed its credit ratings yesterday on UAL and said the company appears almost out of options to keep out of bankruptcy.
"The mechanics' vote makes bankruptcy virtually inevitable for United and UAL," S&P; credit analyst Philip Baggaley said.
United, still trying to carry out its restructuring without going to bankruptcy court, immediately reopened talks with union leaders and was trying yesterday to negotiate a modified agreement that could be put to a new vote, spokesman Jeff Green said.
But a revised version would have to come up with the machinists' roughly $600 million share of United's targeted $5.2 billion in labor cutbacks, Mr. Green indicated. "We need to reach that amount that we already agreed upon [with a coalition of union leaders] if we're going to get a government loan guarantee," he said.
Typically, it takes about a week before a new vote is held, union officials said.
United reiterated Thursday that it will have to file for Chapter 11 bankruptcy protection if it doesn't receive a $1.8 billion federal loan guarantee that would enable it to obtain $2 billion in urgently needed private loans. The Air Transportation Stabilization Board, which Congress created after September 11 to help the struggling airline industry, is expected to announce its decision on the loan guarantee any day.
If it is forced to resort to a bankruptcy filing, United has said it will continue flying its normal schedule. U.S. Airways has been operating normally since filing for bankruptcy in August.
But United and its chief executive, Glenn Tilton, are running out of time to get machinists' on board and preserve tentatively agreed-to labor cuts, which the government board is requiring as a stipulation of any federal backing.
United, the nation's second-biggest carrier, faces a $375 million debt payment Monday, although under a grace period it could push that back to Dec. 16. Its cash reserves are believed to be around $1 billion and dwindling as its operations lose an estimated $7 million a day.
The other looming deadline for United is Dec. 31, when wage-cutting agreements accepted by its pilots and other employee groups expire unless all the airline's workers have agreed to concessions. The machinists are the only holdouts.
Flight attendants are voting on $412 million in wage reductions between now and 2008, with results to be announced today. Their concessions, like the $2.2 billion from pilots, will not take hold unless the machinists go along with cuts of their own, far less likely after they decisively rejected $118 million in average annual givebacks.
The Elk Grove Village, Ill., airline, weakened by a falloff in business travel and the effects of September 11, has reduced daily flights by 25 percent since before the terrorist attacks, and is cutting back 6 percent more in 2003.

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