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Future of United???

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May 15, 2002
United Airlines' stock dives another 21 percent

By Dave Carpenter


Saturday, August 3, 2002

CHICAGO -- United Airlines' long-descending stock plunged another 21 percent Friday after the airline confirmed that it had hired bankruptcy attorneys months ago.

UAL Corp.'s stock fell $1.07 to $4.15, down from $35 a year ago.

United spokesman Joe Hopkins confirmed that the airline had hired bankruptcy lawyers, although he said the hiring was shortly after last year's terrorist attacks -- not earlier this year, as the Business Week report that prompted Friday's stock dive said.

Hopkins declined to comment directly on the prospects of bankruptcy, although he said the bankruptcy firm, which he would not identify, has been retained.

"We're continuing to try to get our labor costs down as part of our recovery, and we're continuing to pursue our loan guarantee through the Air Transport Stabilization Board," he said.

Last month, United reported a second-quarter loss of $341 million, attributing it to widespread fare reductions by discount air carriers and limited spending by business travelers. It warned that it would suffer losses for the remainder of the year, after losing an industry-record $2.1 billion in 2001.

Among its concerns is paying a $900 million debt due in the fourth quarter.

The Elk Grove Village, Ill.-based airline asked the federal government in June to back 80 percent of a $2 billion loan. The government made $10 billion in loan guarantees available to airlines to help carriers in the wake of the terrorist attacks.

Fears of bankruptcy first surfaced last October, when then-CEO James Goodwin warned that United could go out of business this year if it could not stem huge losses that worsened dramatically after Sept. 11. Goodwin resigned in the resulting furor, replaced on an interim basis by UAL board member Jack Creighton.

United has since shored up its cash position by selling planes and making other cutbacks. Excluding $273 million in restricted cash, it reported a hefty cash balance of $2.4 billion as of June 30.

But the airline has said it is virtually shut out of borrowing markets, hurt by its weak standing and the sputtering economy.

Morningstar analyst Jonathan Schrader said bankruptcy is "certainly a possibility" for United, although not necessarily imminent.

"Eventually, unless they make significant changes to their operating structure, they're going to fold," he said. "Their balance sheet is increasingly weak, and they can't take continuing losses by lowering fares."

Anyone have any opinions about the future of UAL? If they go under what happens to companies like ACA?
I think under the current conditions, United could go under, not soon, but in about 1.3 years.

Contradicting my statement, I don't think the government can afford to allow such a large airline to collapse. Air Transportation is too valuable to the counties economy; United is to important to the U.S. Transportation economy.

Look for government intervention should United look like it will go into Bankruptcy.
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DesertFalcon said:

Look for government intervention should United look like it will go into Bankruptcy.

Unlikely. the gov't has already provided billions in loan guarantees.

If UAL enters bankruptcy, it is not necessarily the end. TWA was in bankruptcy for years and still flew. Although it was a shadow of the airline it once was until AA scooped it up.

Don't look for the gov't to bail UAL out, if you don't believe me discuss it with your Eastern and Pan Am collegues.
If UAL goes Chapter 11 and the stock drops buy, buy, buy, tough times but they will still be around.
So if UAL does go into chapter 11, what becomes of the United Express carriers like ACA which rely heavily on them?

Let that stock keep going down. The more people sell and the more it goes down the more I'll buy. United is a solid airline, times are tough right now, but they'll come back around eventually. So they hired some bankruptcy lawyers..that does not mean that they're done with.
I wouldn't buy any stocks in this market. You know it is funny how people say let UAL keep going down and I'll buy more and more. Do you know how many people did that with Enron, WorldCom, Pan Am, Eastern, and so on?

Yes it's tempting, and no one wants to see UAL go down. But if you really want to invest some money in the stock market maybe you should be shorting UAL or U, although it may even be too late for that.
UAL would be a poor short. If you bought UAL at five and they go bankrupt you'll still be well off in the long term. UAL will run out of cash to close to the 2004 election for this government to allow them to cease to exist.

United's stock has really been beaten down. Their market cap is down to 232 million, compared to AMR's cap of 1.5 billion. If you believe that they aren't going away then UAL should be a good investment.
Hey guys, two points.

Is anyone surprised that they hired those Lawyers? Do you think that a company the size of United decides they may need to use the option of bankruptcy, announce it, but never consult professionals that deal with the very subject for a living?

And better yet: The ERP roadshows are this week. This a perfect opportunity for United to tell those pilots to think long and hard before rejecting the plan.

Companies run on money. Don't be fooled. When United runs out of money, it will declare bankruptcy. There will be reorganizations, sale of assets, on & on until slowly the beast will die. Maybe in an earlier day would the govt throw them a life raft, but in todays economic climate don't count on it. Our economic system is based rewarding those who can evolve and compete in and ever changing market. It will be sad when people lose their jobs, and the United heritage is lost, but when it's all said and done the airline industry will be healthier as a stronger player moves in to fill the space.

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