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United Air says pondering early bankruptcy exit
Wednesday May 21, 1:08 pm ET
By Meredith Grossman Dubner
CHICAGO, May 21 (Reuters) - United Airlines said on Wednesday it is weighing whether to emerge from bankruptcy months ahead of schedule, but analysts said the company still has obstacles to overcome before it can operate outside of court protection.
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The world's second largest airline was on track to meet financial targets on bankruptcy loans for April and May, and was considering exiting Chapter 11 as early as the fourth quarter of this year or first quarter of 2004, said United spokesman Jeff Green.
"We're evaluating the possibility of it (emerging earlier than expected)," Green said. "We are looking at the pros and cons of doing it."
United, a unit of UAL Corp. (OTC BB:UALAQ.OB - News), filed the largest bankruptcy in aviation history in December, and said at the time it expected to emerge from bankruptcy in 18 months.
United Chief Financial Officer Jake Brace told The Wall Street Journal on Wednesday that the airline could still miss some of its financial targets by late summer, though, if the revenue environment did not improve.
"We see no impediment to an early exit," Brace told the Journal. "But we want to come out a completely fixed company, not a partially fixed company."
Ray Neidl, airline analyst at Blaylock & Partners, said United was making good progress in its reorganization by locking in deals for $2.56 billion in annual cost-savings with workers. But he said it was still unlikely that the carrier would emerge from bankruptcy by the end of 2003.
"I still don't think they'll make it out this year. I still stick with my first quarter (2004) prediction," he said. "But I think things are going better than expected in what remains a very difficult industry environment."
In addition to labor savings, United is in the process of negotiating with aircraft lessors and other vendors to restructure leases and reduce costs.
Green said United has been making better progress than expected in its cost-cutting efforts and anticipates being "significantly ahead" of the $4 billion in annual savings foreseen by 2005.
In the meantime, the carrier must meet certain monthly financial targets set up by the lenders of its $1.5 billion bankruptcy financing package.
United just received $300 million in aid as part of a federal government package designed to help airlines weather the travel slump during the war with Iraq.
Joe Schwieterman, transportation expert at DePaul University, said a strong summer performance now that the war is over could reassure creditors that the industry has put its worst problems behind it.
"The outlook for the company has markedly improved since the end of the war, but big uncertainties still lie on the horizon," he said.
United Air says pondering early bankruptcy exit
Wednesday May 21, 1:08 pm ET
By Meredith Grossman Dubner
CHICAGO, May 21 (Reuters) - United Airlines said on Wednesday it is weighing whether to emerge from bankruptcy months ahead of schedule, but analysts said the company still has obstacles to overcome before it can operate outside of court protection.
ADVERTISEMENT
The world's second largest airline was on track to meet financial targets on bankruptcy loans for April and May, and was considering exiting Chapter 11 as early as the fourth quarter of this year or first quarter of 2004, said United spokesman Jeff Green.
"We're evaluating the possibility of it (emerging earlier than expected)," Green said. "We are looking at the pros and cons of doing it."
United, a unit of UAL Corp. (OTC BB:UALAQ.OB - News), filed the largest bankruptcy in aviation history in December, and said at the time it expected to emerge from bankruptcy in 18 months.
United Chief Financial Officer Jake Brace told The Wall Street Journal on Wednesday that the airline could still miss some of its financial targets by late summer, though, if the revenue environment did not improve.
"We see no impediment to an early exit," Brace told the Journal. "But we want to come out a completely fixed company, not a partially fixed company."
Ray Neidl, airline analyst at Blaylock & Partners, said United was making good progress in its reorganization by locking in deals for $2.56 billion in annual cost-savings with workers. But he said it was still unlikely that the carrier would emerge from bankruptcy by the end of 2003.
"I still don't think they'll make it out this year. I still stick with my first quarter (2004) prediction," he said. "But I think things are going better than expected in what remains a very difficult industry environment."
In addition to labor savings, United is in the process of negotiating with aircraft lessors and other vendors to restructure leases and reduce costs.
Green said United has been making better progress than expected in its cost-cutting efforts and anticipates being "significantly ahead" of the $4 billion in annual savings foreseen by 2005.
In the meantime, the carrier must meet certain monthly financial targets set up by the lenders of its $1.5 billion bankruptcy financing package.
United just received $300 million in aid as part of a federal government package designed to help airlines weather the travel slump during the war with Iraq.
Joe Schwieterman, transportation expert at DePaul University, said a strong summer performance now that the war is over could reassure creditors that the industry has put its worst problems behind it.
"The outlook for the company has markedly improved since the end of the war, but big uncertainties still lie on the horizon," he said.
