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United's $1.6B loan guarantee denied
By Carolyn Pritchard, CBS MarketWatch.com
Last Update: 9:49 PM ET June 17, 2004
SAN FRANCISCO (CBS.MW) - United Airlines lost its bid late Thursday for $1.6 billion in federal loan guarantees to help it emerge from bankruptcy, but said it would petition the federal Air Transportation Stabilization Board to reconsider.
The Treasury Department, parent agency of the board formed to help U.S. airlines recover from the effect of the Sept. 11, 2001, terrorist attacks, said it would consider a new request.
"Treasury could not support the application as presented," the department said in statement reported by The Associated Press. "Should United submit an improved application in the coming days, Treasury is open to reconsidering it."
Thursday was the second time the board has turned down United, which filed for Chapter 11 bankruptcy protection on Dec. 9, 2002, five days after its first loan guarantee request was rejected.
United (UALAQ: news, chart, profile), which previously has claimed it can emerge from bankruptcy without the loan guarantee, said Thursday it would ask the board to reconsider. The $1.6 billion guarantee was being sought to back a $2 billion private loan package.
"We are perplexed by the announcement made by the Air Transportation Stabilization Board this afternoon," United said in a press release. "We have reason to believe we are in the midst of a process with the ATSB to make our application acceptable and that a decision was premature. We do not believe that the board was made fully aware of the important modifications United was willing to bring to the table. We are respectfully petitioning the ATSB for reconsideration of our pending loan application"
The board cited United's progress in bankruptcy reorganization in denying the guarantee. The airline is based in Elk Grove Village, Ill., a Chicago suburb.
"A majority of the board believes that the likelihood of United succeeding without a loan guarantee is sufficiently high so as to make a loan guarantee unnecessary," the board said in a statement reported by The Associated Press. "A majority of the board determined that a guaranteed loan to United is not a necessary part of maintaining a safe, efficient and viable commercial aviation system in the United States."
According to the AP, two members -- Brian Roseboro, the Treasury Department's undersecretary for domestic finance, and Edward Gramlich, a member of the Federal Reserve Board -- voted to deny United's request. The third member, Jeffrey Shane, an undersecretary at the Transportation Department, voted to defer a decision for one week, the AP reported.
The board was established by Congress to oversee the $10 billion loan program enacted as part of the airline industry bailout in the wake of the Sept. 11 attacks, the AP said. The board has issued six loan guarantees totaling $1.56 billion. Carriers that have gotten help from the board include US Airways (UAIR: news, chart, profile), which received a $900 million loan guarantee, and America West (AWA: news, chart, profile), which got a $380 million guarantee.
The Transportation Department also said Thursday it would support a reconsideration of United's request.
"The Department of Transportation remains prepared to consider United's application in the event that United submits a request for reconsideration accompanied by additional financial information," the agency said in a statement reported by the AP.
United CEO Glenn Tilton and other executives were in Washington this week for last-minute meetings with the panel ahead of the vote.
Tilton told the Associated Press last Friday that the company's 18-month restructuring efforts have left it on "solid enough footing" to exit Chapter 11 whether or not it receives the loan guarantee, the news cooperative reported.
United's restructuring steps have included $2.5 million in annual labor cost reductions and aircraft refinancing, the AP said. Last week, the airline reached agreement with its unions on reductions in retirees' medical and life insurance benefits. The carrier said the modified cuts, combined with a similar agreement with its mechanics' union, will save more than $300 million through 2010, the AP said.
Earlier in June, United asked for three more months to file its reorganization plan, saying it may not emerge from bankruptcy until fall, the AP reported. Soaring jet fuel costs have kept United unprofitable longer than expected and are projected to cost the company $750 million more than expected.
Shares of parent company UAL (UALAQ: news, chart, profile) ended Thursday's session up 28 cents, or 23 percent, at $1.48.
United's $1.6B loan guarantee denied
By Carolyn Pritchard, CBS MarketWatch.com
Last Update: 9:49 PM ET June 17, 2004
SAN FRANCISCO (CBS.MW) - United Airlines lost its bid late Thursday for $1.6 billion in federal loan guarantees to help it emerge from bankruptcy, but said it would petition the federal Air Transportation Stabilization Board to reconsider.
The Treasury Department, parent agency of the board formed to help U.S. airlines recover from the effect of the Sept. 11, 2001, terrorist attacks, said it would consider a new request.
"Treasury could not support the application as presented," the department said in statement reported by The Associated Press. "Should United submit an improved application in the coming days, Treasury is open to reconsidering it."
Thursday was the second time the board has turned down United, which filed for Chapter 11 bankruptcy protection on Dec. 9, 2002, five days after its first loan guarantee request was rejected.
United (UALAQ: news, chart, profile), which previously has claimed it can emerge from bankruptcy without the loan guarantee, said Thursday it would ask the board to reconsider. The $1.6 billion guarantee was being sought to back a $2 billion private loan package.
"We are perplexed by the announcement made by the Air Transportation Stabilization Board this afternoon," United said in a press release. "We have reason to believe we are in the midst of a process with the ATSB to make our application acceptable and that a decision was premature. We do not believe that the board was made fully aware of the important modifications United was willing to bring to the table. We are respectfully petitioning the ATSB for reconsideration of our pending loan application"
The board cited United's progress in bankruptcy reorganization in denying the guarantee. The airline is based in Elk Grove Village, Ill., a Chicago suburb.
"A majority of the board believes that the likelihood of United succeeding without a loan guarantee is sufficiently high so as to make a loan guarantee unnecessary," the board said in a statement reported by The Associated Press. "A majority of the board determined that a guaranteed loan to United is not a necessary part of maintaining a safe, efficient and viable commercial aviation system in the United States."
According to the AP, two members -- Brian Roseboro, the Treasury Department's undersecretary for domestic finance, and Edward Gramlich, a member of the Federal Reserve Board -- voted to deny United's request. The third member, Jeffrey Shane, an undersecretary at the Transportation Department, voted to defer a decision for one week, the AP reported.
The board was established by Congress to oversee the $10 billion loan program enacted as part of the airline industry bailout in the wake of the Sept. 11 attacks, the AP said. The board has issued six loan guarantees totaling $1.56 billion. Carriers that have gotten help from the board include US Airways (UAIR: news, chart, profile), which received a $900 million loan guarantee, and America West (AWA: news, chart, profile), which got a $380 million guarantee.
The Transportation Department also said Thursday it would support a reconsideration of United's request.
"The Department of Transportation remains prepared to consider United's application in the event that United submits a request for reconsideration accompanied by additional financial information," the agency said in a statement reported by the AP.
United CEO Glenn Tilton and other executives were in Washington this week for last-minute meetings with the panel ahead of the vote.
Tilton told the Associated Press last Friday that the company's 18-month restructuring efforts have left it on "solid enough footing" to exit Chapter 11 whether or not it receives the loan guarantee, the news cooperative reported.
United's restructuring steps have included $2.5 million in annual labor cost reductions and aircraft refinancing, the AP said. Last week, the airline reached agreement with its unions on reductions in retirees' medical and life insurance benefits. The carrier said the modified cuts, combined with a similar agreement with its mechanics' union, will save more than $300 million through 2010, the AP said.
Earlier in June, United asked for three more months to file its reorganization plan, saying it may not emerge from bankruptcy until fall, the AP reported. Soaring jet fuel costs have kept United unprofitable longer than expected and are projected to cost the company $750 million more than expected.
Shares of parent company UAL (UALAQ: news, chart, profile) ended Thursday's session up 28 cents, or 23 percent, at $1.48.
