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United Airlines Files Largest Airline Bankruptcy in US History - 2002-12-09


The world's second-largest airline has filed for bankruptcy protection under United States law. Chicago-based United Airlines said it will keep flying its regular schedule while it reorganizes its finances, but United could become a smaller airline.

Just four-years ago, United Airlines was considered an industry leader. Its stock was worth about $100 a share and it flew more passengers than any other U.S. carrier. Today, its stock is worth less than one dollar a share, it is ranked second in passengers carried behind American Airlines, and it is seeking protection from its creditors under chapter 11 of federal bankruptcy laws. It is the largest airline bankruptcy filing in U.S. history.

United chief executive officer Glen Tilton said passengers will not notice any immediate changes. "Service can only get better now that we are in chapter 11. We have absolute, unequivocal focus on the customer, because as everybody with United at O'Hare [Airport] knows, it is the customer, the customer, the customer, so service will be fine," Mr. Tilton said.

Many analysts have said United will likely have to operate fewer flights and raise fares if it hopes to become financially solvent again. Just days ago, the federal government refused to guarantee two billion dollars in private loans to keep United out of bankruptcy court.

The carrier's unions had agreed to about five billion dollars in wage cuts and other concessions. Deeper wage cuts are a possibility as United reorganizes under bankruptcy laws.

Business professor Joe Schwieterman at Chicago's DePaul University said no single reason led to airline's downfall. "United has made some strategic blunders over the years. That together with 9-11 put them in a very difficult spot. Unfortunately, they have not proven very nimble at working themselves out of this crisis," he said.

Two of United's airliners were hijacked in the 2001 terrorist attacks on New York and Washington. Since then, the carrier's already declining passenger load dropped sharply. The company has cut about 25 percent of its flights in the past 15 months, and laid off about 20,000 workers.

Senator Richard Durbin of Illinois said it is possible United could reapply for federal loan guarantees as it reorganizes. "The [federal] board left that option open in one of their letters turning down the guarantee, and left it open for United to come back and perhaps make another application," he said.

United employs about 83,000 people worldwide. It operates one out of every five flights in the United States and has one of the most extensive route systems of any world airline.

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