United Airlines, the second-biggest US airline, was plunging towards bankruptcy today, experts said, after the carrier failed to secure a government bailout.
The Air Transportation Stabilisation Board (ATSB), a panel set up to help the airline industry recover from the September 11 attacks, rejected a UAL bid for a $1.8 billion loan guarantee last night, saying the recovery plan was not financially sound. UAL has almost $1 billion in debt repayments due in the next eight days, and regular sources of credit closed to it.
In the immediate aftermath of the ATSB rejection, UAL stock was suspended pending further information on Wall Street. It had plummeted 61% before official trade began. Experts said the stock, of which 55% is held by United employees, would soon be worthless.
United Airlines' machinists also cancelled a vote on whether to accept a pay-cut, saying it was pointless after the administration's decision. US President George W Bush backed the ATSB members' decision.
Experts said the course was set for a Chapter 11 bankruptcy in which the airline continues to operate under the supervision of a judge while it reorganises.
The ATSB, the panel set up to handle the federal government's bailout of the US airline industry after the blow of September 11, said United Airline's revival plan was 'fundamentally flawed.'
UAL had already embarked on a broad restructuring plan which called for 26,000 layoffs and a 23% cut in capacity. In recent weeks, it had scrambled furiously to nail down the remaining elements of a recovery plan, promising $14.1 billion in savings over five and a half years, with the goal of returning the company to profitability by 2004.
As part of that plan, most of the company's unions had signed off on €5.2 billion in pay cuts in return for profit sharing down the road.
