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Monday, 9 December, 2002, 15:59 GMT
United Airlines files for bankruptcy
United Airlines aeroplanes
United Airlines is struggling to stay afloat
The world's second largest carrier, United Airlines, has filed for bankruptcy in a US court, marking the air travel sector's biggest corporate failure to date.

Key Facts -
United Airlines
Headquarters: Elk Grove Village, Illinois
Hub airports: Los Angeles, Chicago, Washington DC, San Francisco
Staff: 83,000
Planned job cuts: 9,000
Daily flights: 1,800
Planes: 567
Earnings 2001: $16.1bn
Net loss 2001: $2.1bn
Net loss 2002: $1.74bn (to Sept)
During the past year the cash-strapped airline axed thousands of jobs to stay afloat. It had been expected to file for bankruptcy ever since last-ditch attempts to secure an emergency loan from the government fell through last week.

"We took the decision to do today what is right for the company now," UAL chairman and chief executive Glenn Tilton said.

Investors immediately marked down the company's shares price, which dropped nearly 12% to $0.82 in early trading. In March this year, UAL shares traded at $17.90.

UAL's corporate failure comes after last year's 11 September attacks and the general economic slowdown triggered a sharp drop in passenger numbers, putting its finances under severe pressure.

Normal service

The company landed a deal with its lenders, including CIT Group, JP Morgan Chase, Citibank and Bank One, which will provide the $1.5bn required to keep the company flying while a restructuring takes place. The company also has about $800m in cash.

Normal passenger services will not be affected.

"We're going to be flying planes today, tomorrow, next week, and next year. The passengers shouldn't notice any difference," a spokesman for UAL's pilots' union said.

The financing deal follows the rejection of UAL's application for a $1.8bn (1.15bn) loan from the Air Transport Stabilization Board (ATSB), set up to help US airlines in the wake of the 11 September attacks.

However, the firm's collapse is likely to leave its shareholders nursing hefty losses.

These include UAL's own staff, who own about 55% of the company.

And any restructuring exercise is likely to lead to job losses, on top of the 20,000 lay-offs announced in the aftermath of 11 September.

United sign in the airport
United staff have been asked to accept pay cuts

UAL has already been seeking wage and benefit concessions from its staff in a bid to reduce its costs and mounting debt pile.

The firm has a history of troubled industrial relations, and has to cope with higher costs than most of its competitors.

Rising debts

United chronology
1931: United Air Lines created
1993: Staff gain 53% ownership
2000: Agrees to buy US Airways
July 2001: Government blocks United/US Airways merger
September 2001: Terrorists crash United aircraft into World Trade Center and Pennsylvania field
September 2001: Announces plan to lay off 20,000 workers
February 2002: announces $2.1bn record loss
June 2002: Asks government backing for $1.8bn loan
October 2002: Share price falls to $1.42
December 2002: Officials reject $1.8bn plea
December 2002: United goes bankrupt

UAL lost $2.1bn last year and is expected to lose $2.5bn this year.

It has $920m in debt repayments due in the next week.

Last week, the group's shares lost over two-thirds of their value following news of the loan rejection, ending the week at just 93 cents.

The bankruptcy is the second failure in the US airline sector this year after US Airways - once seen as a merger partner for United - filed for bankruptcy protection in August.

In Europe, the post 11-September dip in passenger numbers contributed to the collapse last year of Swiss national carrier Swissair, and its Belgian subsidiary Sabena.

The BBC's Stephen Evans
"They are being beaten by the nimble competition"
Glenn Tilton, UAL chief executive
"We are going to take this opportunity to create a new beginning for United"
Virgin Atlantic's Sir Richard Branson
"Logically one or two of the other big American carriers are likely to go"
Airlines around the world are cutting staff after the terror attack

Bankruptcy for United

Other US airlines

Europe's troubles
See also:

09 Dec 02 | Business
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