US Denies United Airlines Loan Guarantee
Thursday June 17, 9:16 pm ET
WASHINGTON (Reuters) - United Airlines lost its bid for a $1.6 billion federal loan guarantee on Thursday, prompting new uncertainty about its prospects for emerging from bankruptcy this fall.
The Air Transportation Stabilization Board voted to reject United for a second time, but said it might reconsider the matter.
[size=-2]ADVERTISEMENT[/size]on error resume nextplugin=(IsObject(CreateObject("ShockwaveFlash.ShockwaveFlash.5")))United, the No. 2 U.S. airline and a unit of UAL Corp. (OTC BB:UALAQ.OB - News), said it was "perplexed" by the announcement and believes the decision was premature.
"We do not believe that the board was made fully aware of the important modifications United was willing to bring to the table," the company said in a statement. "We are respectfully petitioning the ATSB for reconsideration of our pending loan application."
The airline's pilots' union, the Air Line Pilots Association, called the decision "a slap in the face" to employees.
United has been in Chapter 11 since December 2002 and sought the loan guarantee to back $2 billion in private financing that is crucial to its restructuring.
But the stabilization board, created after the September 2001 hijack attacks to help struggling airlines, disagreed United's situation is unworkable. It credited cost-cutting moves over the past 18 months and said it believes the company's access to credit markets is improving.
"Given these circumstances, a majority of the board believes that the likelihood of United succeeding without a loan guarantees is sufficiently high so as to make a loan guarantee unnecessary," the board said in a letter to United Chief Financial Officer Frederic Brace. Company officials have been reluctant to discuss alternative financing. Brace said several months ago that the company would get out bankruptcy "one way or another."
Thursday June 17, 9:16 pm ET
WASHINGTON (Reuters) - United Airlines lost its bid for a $1.6 billion federal loan guarantee on Thursday, prompting new uncertainty about its prospects for emerging from bankruptcy this fall.
The Air Transportation Stabilization Board voted to reject United for a second time, but said it might reconsider the matter.
[size=-2]ADVERTISEMENT[/size]on error resume nextplugin=(IsObject(CreateObject("ShockwaveFlash.ShockwaveFlash.5")))United, the No. 2 U.S. airline and a unit of UAL Corp. (OTC BB:UALAQ.OB - News), said it was "perplexed" by the announcement and believes the decision was premature.
"We do not believe that the board was made fully aware of the important modifications United was willing to bring to the table," the company said in a statement. "We are respectfully petitioning the ATSB for reconsideration of our pending loan application."
The airline's pilots' union, the Air Line Pilots Association, called the decision "a slap in the face" to employees.
United has been in Chapter 11 since December 2002 and sought the loan guarantee to back $2 billion in private financing that is crucial to its restructuring.
But the stabilization board, created after the September 2001 hijack attacks to help struggling airlines, disagreed United's situation is unworkable. It credited cost-cutting moves over the past 18 months and said it believes the company's access to credit markets is improving.
"Given these circumstances, a majority of the board believes that the likelihood of United succeeding without a loan guarantees is sufficiently high so as to make a loan guarantee unnecessary," the board said in a letter to United Chief Financial Officer Frederic Brace. Company officials have been reluctant to discuss alternative financing. Brace said several months ago that the company would get out bankruptcy "one way or another."
