The second-largest airline in the United States might be on the verge of bankruptcy. Chicago-based United Airlines was turned down Wednesday for U.S. government loan guarantees, and the airline's stock immediately fell by about 60 percent.
Shares of United Airlines' parent company, UAL Corp., opened 59 percent lower on Wall Street. Trading was immediately halted on word that the airline might have a statement to make, possibly about filing for bankruptcy.
But, United officials say no announcements are planned for today.
This follows a decision Wednesday by the Air Transportation Stabilization Board not to approve United's request for $1.8 billion in federal loan guarantees. United says it needs those guarantees so it can borrow about $2 billion to keep the carrier in the air.
In Chicago, Herb Hunter, of the United Airlines pilots union, criticized the board's decision.
"What they have done here is give a victory to the terrorists, all the way back to September 11," he said. "The ATSB program was made to help carriers like United Airlines. The employees have stepped up and the government has not."
The board was created last year to assist airlines hurt by the drop-off in business after the terrorist attacks on New York and Washington. The largest guaranteed loan it has approved is about half of what United was requesting $900 million for U.S. Airways.
Without the guarantee, analysts expect United to file for bankruptcy protection. The carrier is losing about $8 million a day, has defaulted on about $900 million in loans, and has to pay a portion of that debt by Monday.
United says it will keep flying if it declares bankruptcy, but Illinois Governor George Ryan says he is worried about United's long-term health.
"United is responsible for some 18,000 jobs in Illinois, then you have all the ancillary services," he said. "I do not know how many jobs are there. It is going to have an impact. It is not good for Illinois, especially with our economy in the shape that it is in now."
United had won about $5 billion worth of wage cuts and other concessions from its employees unions, in an effort to help it win the federal loan guarantees. But the board said it feared loans would only delay a financial crisis at United for a couple of years.
Under a bankruptcy filing, the airline would be protected from its creditors while it develops a financial recovery plan. But even that might not help the airline. A column in the Chicago Tribune newspaper says about 130 airlines have sought bankruptcy protection in the past, and fewer than ten recovered and prospered.