UAL Corp. (UALAQ: news, chart, profile), the parent of United Airlines, will remain under federal bankruptcy protection this year because of uncertainties surrounding its financial results and other unresolved issues, a company attorney said Friday in bankruptcy court, according to wire reports. Shares of UAL moved slightly higher at 75 cents.
CHICAGO (Reuters) - United Airlines parent UAL Corp. (OTC BB:UALAQ.OB - News) said on Friday an uncertain industry outlook means it no longer plans to exit early from bankruptcy, and it now aims to emerge in the first half of 2004.
Executives including Chief Executive Glenn Tilton and Chief Financial Officer Jake Brace had recently indicated that the world's second-largest airline might exit from Chapter 11 much earlier than the 18 months originally projected last December, when UAL filed the largest bankruptcy in aviation history.
United's Tilton has given conflicting signals on the timing a bankruptcy exit, but in recent weeks expressed a strong desire for emerging early next year to take advantage of spring travel. US Airways timed its March 31 bankruptcy exit the same way this year, emerging in just eight months.
A number of issues in the United bankruptcy need to be resolved, including contributions to pension plans, Sprayregen said. One involves pension contributions that would require a significant portion of the airline's cash flow going forward.
A range of options are being studied, he said.
United has four separate pension plans, which are underfunded by at least $6 billion, according to recent documents filed with the U.S. Securities and Exchange Commission (News - Websites).
The uncertainty regarding United's business relationship with Atlantic Coast Airlines (NasdaqNM:ACAI - News) and municipal bond litigation are other outstanding issues, along with a special provision of the bankruptcy code known as Section 1110, which deals with the rejection of various aircraft leases.
Moody's Investors Service (News - Websites) late Thursday downgraded ratings on some United debt backed by aircraft. The agency said it downgraded certain Equipment Trust Certificates and Enhanced Equipment Trust Certificates due to uncertainties about sufficient cash flow and increased potential for principal loss to debt holders.
"All of these issues and others are highly relevant to United's business plan," Sprayregen said.
Sprayregen said United will soon submit a court motion to extend the period in which the company has exclusive rights to file its reorganization plan.
[Edited 2003-08-29 20:54:45]