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United Wants US$ 1.8 Billion Loan Aid

Wed Jun 26, 2002 8:31 pm

America's second largest carrier, United Airlines, is to ask the federal government for USD$1.8 billion in loan aid as it fights to recover from major financial troubles.

The Chicago-based airline said Monday that it had requested a USD$2 billion loan with USD$1.8 billion guaranteed by the Air Transportation Stabilization Board.

It is the biggest US carrier to ask for assistance under the ASTB scheme, which was introduced last year to protect the nation's passenger airlines from the huge downturn in air travel after the September terrorist attacks.

United's Chairman and Chief Executive Officer Jack Creighton, said the company had a strong case for receiving help from the ASTB program. "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," he said.

"In addition to the human tragedy involved, the events have had a significant impact on our revenues and costs. We are 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 do not believe they will be sufficient because our access to the capital markets has been severely restricted.

"Without a solution to our near-term funding requirements we will diminish our prospects for growth when the economy recovers," Creighton said.

United, which has some of the highest labor costs in the industry, has launched a recovery plan to help convince the ASTB it is putting its finances in order. Pleas to its employees to make pay concessions have resulted in deals with pilots and non-union staff which should save an estimated USD$950 million over the next three years.

Creighton has not, however, won the backing of two groups - the airline's flight attendants and mechanics. The flight attendants say they will not consider any deals until outstanding contract issues have been resolved.

United is also in the process of negotiating a code-sharing deal with US Airways, an airline which itself has asked for USD$900 million in government aid.