This article from NYTimes.com has been sent to you by psa188@juno.com. European Airlines See Threat in Aid to United December 4, 2002 By SUZANNE KAPNER LONDON, Dec. 3 - As United Airlines struggles to stay out of bankruptcy court, Europe is watching closely. Will United obtain the $1.8 billion in federal loan guarantees it has requested? Or will it be forced to reorganize its operations under the shield of Chapter 11 bankruptcy proceedings? "Europeans are going to cry foul whichever way it goes," Andrew Lobbenberg, an analyst with ABN Amro in London, said. Already concerned about the large federal grants that United States carriers received in the wake of the September 2001 terrorist attacks, some European executives are complaining that bankruptcy protection, too, offers the Americans an unfair advantage by temporarily suspending some financial obligations. There is no direct European comparison to American-style bankruptcy protection. Laws differ from country to country, and most provide less protection to troubled companies than the law in the United States, analysts said. Carriers operating under United States bankruptcy protection, for instance, need only generate enough cash to keep the business running, not to make debt payments or please shareholders. That enables a carrier to gain a competitive edge by sharply reducing fares, Mr. Lobbenberg said. While in bankruptcy court, moreover, an airline can cut costs and restructure its operations with far greater ease, allowing it to emerge stronger and leaner. Of course, some analysts said, that assumes the airline can solve the problems that put it in bankruptcy in the first place. Still, market forces, even those like bankruptcy proceedings that give American carriers a slight advantage, are still preferable to outright government subsidies, some European airline officials said. "We would prefer market forces to dictate the fate of the airline business," said Steve Double, a spokesman for British Airways. "There are too many airlines, and there is a need for consolidation in the industry." Rod Eddington, British Airways' chief executive, has been a vocal critic of federal grants and loan guarantees, which he estimates have totaled $9 billion in the United States since the terrorist attacks. "The playing field has tilted even further in favor of the U.S. airline industry, as its government has provided massive direct and indirect financial support," Mr. Eddington told a gathering of independent economic advisers earlier this month. Officials of other airlines, especially those with a more direct interest in United's survival, like its international partners in the Star Alliance, have a somewhat different view. "We welcome anything that will assist United Airlines," a spokesman for Lufthansa, Rolf Halbroth, said. Wolfgang Mayrhuber, who is to succeed Jürgen Weber as Lufthansa's chief executive in June, recently told European newspapers that he would not oppose financial aid to United, a UAL Corporation unit, as long as it could be guaranteed in some way. Most analysts said that as long as United continued to fly, its financial troubles would have little effect on the Star Alliance, whose members, besides United and Lufthansa, include Air Canada, British Midland Airways, Singapore Airlines and Varig, among others. The members redeem one another's frequent-flier miles and share reservations information and even revenue on some routes. European officials, including the European Commission, critical of United States subsidies in the past, have so far remained on the sidelines during the intense lobbying over United's loan guarantees, government officials said. One explanation, according to analysts, is that the commission, the year-round administrative arm of the European Union, is taking a more conciliatory tone with Washington now that it hopes to supplant member countries in negotiating new trans-Atlantic airline treaties. http://www.nytimes.com/2002/12/04/business/04EURO.html?ex=1040012843&ei=1&en=f6254bc6ac88b733 HOW TO ADVERTISE --------------------------------- For information on advertising in e-mail newsletters or other creative advertising opportunities with The New York Times on the Web, please contact onlinesales@nytimes.com or visit our online media kit at http://www.nytimes.com/adinfo For general information about NYTimes.com, write to help@nytimes.com. Copyright 2002 The New York Times Company