- The Washington Times - Friday, October 25, 2002

CHICAGO (AP) United Airlines, after shoring up its appeal for federal aid, renewed efforts yesterday to secure the key element of its emergency financial overhaul: $5.8 billion in targeted labor concessions.

The nation's No. 2 carrier, hoping to steer clear of the bankruptcy filing it has warned may be necessary, continued individual negotiations with its unions on their share of the cutbacks the airline is seeking to spread over 5½ years.

Spokesmen for the airline and the unions declined to divulge details or characterize the progress of the talks other than to confirm that multiple sets of negotiations were under way yesterday.

Despite United's filing of an updated business plan containing sharply increased cost-saving measures beyond those outlined in June, industry observers remained skeptical. They were not sure whether the measures would be enough to persuade the Air Transportation Stabilization Board (ATSB) to provide the requested and much-needed $1.8 billion loan guarantee.

Analyst James Higgins of Credit Suisse First Boston said that the board is likely to take 30 to 45 days to review the plan, putting a decision date "dangerously close" to a $575 million debt-payment deadline of Dec. 2 faced by the cash-crunched United.

"Time is not on UAL's side," he said in a note to investors in United's parent, UAL Corp. "Even if, as we believe is possible, UAL's $300 million debt repayment due on Nov. 17 is delayed, the carrier could find itself with less than $700 million in cash by early December a level that would almost definitely lead to a Chapter 11 filing."

Standard & Poor's analyst Philip Baggaley agreed that "the time remaining to avert bankruptcy is dwindling" and called the progress from labor talks slow. But he suggested that the government might be hard-pressed to reject United's bid if the expected repercussions are dire.

"Given United's role as a major employer and provider of air transportation in selected cities and states, the ATSB may face political pressure to agree to a loan guarantee, particularly if the U.S. is at that point involved in a war with Iraq, which would deepen the airline industry's revenue problems," Mr. Baggaley said in a research note.

UAL shares closed yesterday unchanged at $2.34 on the New York Stock Exchange.

Harsher cuts were necessary for United after the federal board signaled that the airline's earlier proposal was insufficient.

The ATSB has declined to comment publicly on the process and a spokeswoman did not immediately return a phone call about United's application.

The revised application, reflecting a bleak outlook for the troubled airline industry, calls for a 12 percent reduction in capacity in 2003 beyond what it envisioned in its original application in June. That would reduce United's daily flight schedule of about 1,900 to 1,700 or fewer next year.

The airline also added other cost-saving measures: further reduction in 2003-05 capital spending of $1.2 billion and plans to stop flying in January to four international cities Caracas, Venezuela; Santiago, Chile; Dusseldorf, Germany; and Milan, Italy as well as flying smaller aircraft on seven overseas routes.

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