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United Airlines Files for Federal Loan Guarantees

24 June 2002

United Airlines (NYSE: UAL) announced that it has filed for federal loan guarantees today with the Air Transportation Stabilization Board (ATSB). United has requested a loan of $2 billion, with $1.8 billion guaranteed by the ATSB. 

"United is the perfect candidate for the ATSB program," said United Airlines Chairman and Chief Executive Officer Jack Creighton. "It was created to help carriers weather the liquidity challenges associated with the September 11, 2001 terrorist attacks on our nation. United was both a target and a victim of the attacks. 

“In addition to the human tragedy involved, the events have had a significant impact on our revenues and costs,“ Creighton added. “We’re now burdened by short-term financing needs that are driven by the aftermath of September 11 and aggravated by the weak economic recovery. While we continue to explore financing alternatives, we don’t believe they will be sufficient because our access to the capital markets has been severely restricted. 

“Nevertheless, United also has a strong and viable business plan that meets ATSB requirements and demonstrates our ability to repay the loan,” Creighton continued. “But without a solution to our near-term funding requirements we will diminish our prospects for growth when the economy recovers.* Given the vital role United plays in the nation's air transportation infrastructure, that's an outcome I believe we'd all like to avoid." 

Last week, the company announced that proposed participation in its financial recovery plan by its salaried and management employees, and its pilots, could result in an estimated $950 million in savings from the pilots' and salaried and management employees' new pay rates over the next three years.* The tentative pilot agreement includes other provisions that would offer United additional meaningful revenue opportunities and cost savings. In addition, the company has reduced capital spending plans by $3 billion, and cut operating expenses significantly.

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