CHICAGO (AP) - United Airlines' stock lost nearly a quarter of its value Friday on investor fears that a crippling labor vote setback has dashed its efforts to avoid a Chapter 11 bankruptcy filing.
Shares in United parent company UAL Corp. plummeted 84 cents, or 23 percent, to close at $2.79 in a heavy selloff during shortened holiday hours on the New York Stock Exchange (news - web sites). More than 21 million shares were traded, six times the average daily volume, and at one point the stock sank as low as $1.72 — not far off the more than four-decade low of $1.42 reached last month.
Following United mechanics' rejection Wednesday of pay cuts that are a key element of its multibillion-dollar financial recovery plan, Standard & Poor's slashed its credit ratings Friday on UAL and said the company appears almost out of options to keep out of bankruptcy.
"The mechanics' vote makes bankruptcy virtually inevitable for United and UAL," S&P credit analyst Philip Baggaley said.
United, still trying to carry out its restructuring without going to bankruptcy court, immediately reopened talks with union leaders and was trying Friday to negotiate a modified agreement that could be put to a new vote, spokesman Jeff Green said.
But a revised version would still have to come up with the mechanics' roughly $600 million share of United's targeted $5.2 billion in labor cutbacks, Green indicated. "We need to reach that amount that we already agreed upon (with a coalition of union leaders) if we're going to get a government loan guarantee," he said.
Normally, it would take about a week before a new vote is held, union officials said.
United reiterated Thursday that it will be forced to file for Chapter 11 bankruptcy if it doesn't receive a $1.8 billion federal loan guarantee that would enable it to obtain $2 billion in urgently needed private loans. The Air Transportation Stabilization Board is expected to announce its decision on the loan guarantee any day.
If it is forced to resort to a bankruptcy filing, United has said it will continue flying its normal schedule. Another major airline, U.S. Airways, has been operating normally since filing for bankruptcy in August.
But United and CEO Glenn Tilton are running out of time to get mechanics on board and preserve tentatively agreed-to labor cuts, which the government board is requiring as a stipulation of any federal backing.