storminpilot
Well-known member
- Joined
- Jul 6, 2003
- Posts
- 282
http://www.usatoday.com/money/biztravel/2004-12-07-united-usat_x.htm
United moves slowly, painfully
By Marilyn Adams, USA TODAY
When United Airlines said in December 2002 it would need 18 months to restructure its far-flung system, many outsiders doubted its bankruptcy case would take so long.
Two years later, United is still flying in bankruptcy and in the red, and an exit is not foreseen until deep into 2005 — if then. Thursday marks the second anniversary of the filing by the No 2 carrier, the biggest airline bankruptcy filing ever. And like a force of nature, the giant case continues to send shock waves as it lumbers forward.
It's overhauling its flight schedule, launching routes to China and testing the limits of bankruptcy laws to reduce debt.
"This is a restructuring that's breaking new ground," United CEO Glenn Tilton said in an interview with USA TODAY.
From the beginning, the case has unfolded like a melodrama.
United filed for protection from creditors 15 months after the Sept. 11 attackers drove one of its jets into the World Trade Center, and another into a Pennsylvania field. Just a few months after filing, United and other airlines were grappling with new catastrophes: the war in Iraq and the SARS epidemic.
'One horrendous thing after another'
This year, the nightmare has been high fuel prices, which will cost United $1 billion more than planned.
"It's been one horrendous thing after another," says Capt. Steve Derebey, a spokesman for the Air Line Pilots Association. "I keep waiting for the locusts."
The most public setback has been a government board's repeated refusal to grant United a federal loan guarantee to help it land $2 billion in financing. The first denial by the Air Transportation Stabilization Board, in December 2002, precipitated the Chapter 11 filing. The second, in June, set the stage for a new round of painful cost cutting aimed at restoring profitability even with record fuel prices and cheap fares.
"Complex Chapter 11s take a long time," says Boston-based bankruptcy lawyer Jon Schneider, who has worked on large airline cases in the past. United still lacks a business plan for operating outside bankruptcy, he said, "because the economics of this industry are so difficult."
With fuel prices draining cash, United's bankruptcy lenders recently waived their financial performance requirements for three months because otherwise United would have defaulted.
Sheer numbers tell the story of the mammoth bankruptcy. As of Tuesday, case No. 02-48191 in the bankruptcy court in Chicago contained 9,043 docket entries. Through midyear, United had been billed $142 million by bankruptcy lawyers, accountants and consulting firms working on the case. United's workforce has shrunk to 62,000 workers, off by about a quarter from two years ago. Those who remain are working harder, earning less and can expect smaller pensions.
Inside the company, the stress of change is ever present. Rumors fed by fear and uncertainty fly through the company on transcontinental flights and in Internet chat rooms.
"There's a rumor a day," Derebey says.
But Tilton and other executives are encouraged by what they see as progress. Although United is still posting large losses, the size of those losses is generally shrinking. United's unit costs — what it spends to fly one seat one mile — are gradually falling. Its on-time and lost-bag performance have been among the best in the industry.
In the midst of bankruptcy, United earlier this year launched an airline-within-an-airline, Ted, to compete with discount carriers at their own game in Chicago, Denver, Washington and elsewhere. Although the company won't divulge its financial performance, Ted appears to be putting pressure on competitors.
In Chicago, for example, United competitor ATA Airlines, a discounter flying from Midway, filed its own Chapter 11 bankruptcy this fall when it ran short of cash.
Treacherous times ahead
As hairy as the last two years have been for United, the next several months could be the most treacherous.
Incensed by new cost cuts, United's largest union, the International Association of Machinists, recently asked the court to oust United's management team and install a trustee to run the company. The IAM backed off after United agreed to hire a consultant to analyze the business plan for the union.
Aircraft investors last month tried to repossess 14 United jets because of a dispute over the leases. The airline was forced to get an emergency court order to keep flying the planes.
But United's demand for new pay cuts and new, cheaper pension plans promises to be the most toxic battle. The flight attendants union has vowed to disrupt flights if that happens, and the IAM warns of repercussions as well.
"This airline cannot survive without loyal employees," says Robert Roach, IAM general vice president
United now hopes to exit bankruptcy in fall 2005, more than a year after original expectations. Between now and then, United must win new labor concessions, resolve its pension plans, get deals with aircraft investors and keep creditors satisfied.
"That's a big if," says airline analyst Philip Baggaley of credit rating agency Standard & Poor's. "This story could still end in any number of ways."
United moves slowly, painfully
By Marilyn Adams, USA TODAY
When United Airlines said in December 2002 it would need 18 months to restructure its far-flung system, many outsiders doubted its bankruptcy case would take so long.
Two years later, United is still flying in bankruptcy and in the red, and an exit is not foreseen until deep into 2005 — if then. Thursday marks the second anniversary of the filing by the No 2 carrier, the biggest airline bankruptcy filing ever. And like a force of nature, the giant case continues to send shock waves as it lumbers forward.
Today, Chicago-based United is on the brink of the single-biggest pension default in history, an act that would shift billions of dollars in costs from the airline to a federal agency. It's asking unionized employees for a second round of pay cuts that would bring the total reduction to $3.2 billion a year. A pension default and a new round of $700 million in annual cuts could force other airlines to rip up their labor contracts to stay competitive.
It's overhauling its flight schedule, launching routes to China and testing the limits of bankruptcy laws to reduce debt.
"This is a restructuring that's breaking new ground," United CEO Glenn Tilton said in an interview with USA TODAY.
From the beginning, the case has unfolded like a melodrama.
United filed for protection from creditors 15 months after the Sept. 11 attackers drove one of its jets into the World Trade Center, and another into a Pennsylvania field. Just a few months after filing, United and other airlines were grappling with new catastrophes: the war in Iraq and the SARS epidemic.
'One horrendous thing after another'
This year, the nightmare has been high fuel prices, which will cost United $1 billion more than planned.
"It's been one horrendous thing after another," says Capt. Steve Derebey, a spokesman for the Air Line Pilots Association. "I keep waiting for the locusts."
The most public setback has been a government board's repeated refusal to grant United a federal loan guarantee to help it land $2 billion in financing. The first denial by the Air Transportation Stabilization Board, in December 2002, precipitated the Chapter 11 filing. The second, in June, set the stage for a new round of painful cost cutting aimed at restoring profitability even with record fuel prices and cheap fares.
"Complex Chapter 11s take a long time," says Boston-based bankruptcy lawyer Jon Schneider, who has worked on large airline cases in the past. United still lacks a business plan for operating outside bankruptcy, he said, "because the economics of this industry are so difficult."
With fuel prices draining cash, United's bankruptcy lenders recently waived their financial performance requirements for three months because otherwise United would have defaulted.
Sheer numbers tell the story of the mammoth bankruptcy. As of Tuesday, case No. 02-48191 in the bankruptcy court in Chicago contained 9,043 docket entries. Through midyear, United had been billed $142 million by bankruptcy lawyers, accountants and consulting firms working on the case. United's workforce has shrunk to 62,000 workers, off by about a quarter from two years ago. Those who remain are working harder, earning less and can expect smaller pensions.
Inside the company, the stress of change is ever present. Rumors fed by fear and uncertainty fly through the company on transcontinental flights and in Internet chat rooms.
"There's a rumor a day," Derebey says.
But Tilton and other executives are encouraged by what they see as progress. Although United is still posting large losses, the size of those losses is generally shrinking. United's unit costs — what it spends to fly one seat one mile — are gradually falling. Its on-time and lost-bag performance have been among the best in the industry.
In the midst of bankruptcy, United earlier this year launched an airline-within-an-airline, Ted, to compete with discount carriers at their own game in Chicago, Denver, Washington and elsewhere. Although the company won't divulge its financial performance, Ted appears to be putting pressure on competitors.
In Chicago, for example, United competitor ATA Airlines, a discounter flying from Midway, filed its own Chapter 11 bankruptcy this fall when it ran short of cash.
Treacherous times ahead
As hairy as the last two years have been for United, the next several months could be the most treacherous.
Incensed by new cost cuts, United's largest union, the International Association of Machinists, recently asked the court to oust United's management team and install a trustee to run the company. The IAM backed off after United agreed to hire a consultant to analyze the business plan for the union.
Aircraft investors last month tried to repossess 14 United jets because of a dispute over the leases. The airline was forced to get an emergency court order to keep flying the planes.
But United's demand for new pay cuts and new, cheaper pension plans promises to be the most toxic battle. The flight attendants union has vowed to disrupt flights if that happens, and the IAM warns of repercussions as well.
"This airline cannot survive without loyal employees," says Robert Roach, IAM general vice president
United now hopes to exit bankruptcy in fall 2005, more than a year after original expectations. Between now and then, United must win new labor concessions, resolve its pension plans, get deals with aircraft investors and keep creditors satisfied.
"That's a big if," says airline analyst Philip Baggaley of credit rating agency Standard & Poor's. "This story could still end in any number of ways."
We have a new idiot who knows the airline biz. You're only 355 hours from Lowecur there buttercup. "Take it up the rear trying to compete with UAL"?, you need to spend less time on this board and more time cleaning the FBO.
