UAL may go bankrupt if loans aren't forthcoming

A United Airlines Boeing 747 takes off from Los Angeles International Airport in this file photo. United Airlines' struggling parent company, UAL Corp, announced an urgent cost-cutting effort Wednesday. PHOTO: AP

United Airlines parent UAL Corp said it may seek bankruptcy protection later this year if the carrier can't cut costs and win a US loan guarantee to help pay US$875 million of debt due in the fourth quarter.

Paying the debt from reserves may leave the company with too little money for operations, UAL said in a filing with the US.

Securities and Exchange Commission. The world's second-biggest carrier said it is revising its application for a US$1.8 billion loan guarantee to include more cost reductions and wants workers to agree to participate in the next 30 days.

Losses mounted at UAL and rivals after the Sept. 11 attacks, prompting US Airways Group Inc to seek bankruptcy protection Sunday and AMR Corp's American Airlines to say yesterday it will cut 7,000 more jobs. Chief Executive Officer Jack Creighton told workers this week that UAL's loan application has been coolly received in Washington and that bigger concessions are needed.

"Unless we lower our costs dramatically, filing for bankruptcy protection will be the only way we can ensure the company's future and the continued operation of our airline," Creighton said in a statement today.

UAL fell US$0.68 to US$2.06 at 6:06pm in off-exchange trading after the New York Stock Exchange closed, the lowest price since at least August 1980. Shares fell US$0.29, or 11 percent, to US$2.45 in NYSE composite trading at 4:19pm. The stock has dropped 92 percent since Sept. 10.

"Part of what this is intended to do is to get the pilots and the mechanics to start focusing on how serious this situation is," said Jon Ash, managing director of Global Aviation Associates, a Washington airline-consulting firm. "Given what US Air is doing, what American has announced -- maybe that all is creating a wake-up call."