This information is no longer current - it is for reference only. It is an archive review of events that took place during United Airline's Chapter 11 Bankruptcy from December 9, 2002 - February 1, 2006.

United Plans to End Stay in Bankruptcy

Date: January 29, 2006
Type: Media Article

Source: New York Times
Author: Jeff Bailey

CHICAGO, Jan. 31 — United Airlines is expected to end its 38-month stay in bankruptcy proceedings on Wednesday, but the carrier may not be profitable this year because of a recent surge in fuel prices.

Many of United's 57,000 workers, meanwhile, though relieved to be ending their stay in bankruptcy, are wary of management's plans to continue to streamline the carrier. Still somewhat untested, union representatives say, are work rule changes negotiated as part of the bankruptcy and just how much more employees can be asked to do.

The UAL Corporation, the parent company of United, exits bankruptcy having acknowledged that, for 2006 at least, fuel will probably cost it a lot more than it earlier projected. The company now expects to spend about $4.3 billion on fuel this year, instead of the $3.4 billion earlier estimated, according to a statement released last week.

"They're not making any money," Roger King, an analyst at CreditSights, said of United. "Normally you'd think, when you leave bankruptcy, you'd be making money."

That could wipe out most if not all of the profit, before one-time gains, UAL had been expecting for the year. The company said it expected to offset "some, but not all" of the increased fuel expense through higher revenue.

The fuel issue — oil trading above $60 a barrel instead of the $50 United had hoped for — is likely to be just the first of many challenges the carrier will face post-bankruptcy. United has cut employment by roughly a quarter. It expects by 2010 to have its annual costs $7 billion below pre-bankruptcy levels. And it was able to wipe out $13 billion of debt and pension obligations. But its prospects are no more assured than those of other carriers.

Low-cost airlines continue to gain market share. Consumers and businesses, using the Internet, are becoming increasingly adept at shopping for the best fares. And any economic downturn could cause another round of huge losses for the industry.

"They're not making any money," Roger King, an analyst at CreditSights, said of United. "Normally you'd think, when you leave bankruptcy, you'd be making money." Mr. King said United's costs remain very close to those at American Airlines and Continental Airlines, two carriers that have chosen to try to streamline outside of bankruptcy court. "They didn't distance themselves from American and Continental," Mr. King said.

Glenn F. Tilton, chief executive officer of UAL, said in an interview late last year that United had become far more competitive and flexible. He noted that most corporate officers from the pre-bankruptcy days "are gone" and that he hoped to hire still more outsiders.

Mr. Tilton, a former oil company executive, also said that "opportunities abound" for United to become more efficient by either outsourcing some operations or continuing to do those activities for itself as well as for other carriers. It makes no sense, he said, for instance, for a dozen airlines at a single airport to have separate baggage handling and fueling operations.

"We anticipate continuous improvement," said Jean Medina, a United spokeswoman. "We got the work rule changes we needed as part of the bankruptcy."

That sort of talk, of course, worries some United workers. United pilots plan a news conference on Wednesday to present their views on how the airline ought to be run. "We capitalized that airline" with wage and benefit cuts, said David Kelly, a spokesman for the United chapter of the Air Line Pilots Association. He said the union wanted to "make sure our money is invested wisely."

One reason to appreciate the end of bankruptcy proceedings, said Greg Davidowitch, president of the United chapter of the Association of Flight Attendants, is "management can't rely on the bankruptcy court to hold over the heads of employees additional concessions."

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