This article from NYTimes.com has been sent to you by psa188@juno.com. Trading Resumes After United Stock Fall December 5, 2002 By THE ASSOCIATED PRESS Filed at 2:41 p.m. ET CHICAGO (AP) -- Shares of United Airlines' parent tumbled 64 percent Thursday after being halted for most of the morning, a day after the world's second-largest carrier lost its request for government loan backing it said was needed to keep it out of bankruptcy. Amid heightened speculation on Wall Street that a bankruptcy filing may be imminent, the New York Stock Exchange had stopped trading in United parent UAL Corp.'s shares early Thursday because of ``news that's pending that could materially affect the trading of the stock,'' NYSE spokesman Ray Pellecchia said. Before trading was stopped, UAL shares opened down $1.84, or 59 percent, to $1.28 -- their lowest level in more than 40 years. When trading resumed in the early afternoon, shares extended their decline and were down $2.01 at $1.11. Chief executive Glenn Tilton, following a meeting with leaders of the pilots' union that holds the largest single stake in the airline, declined to say whether United will file for bankruptcy but said it is not inevitable. Asked whether bankruptcy is a foregone conclusion, Tilton told Chicago's WLS-TV: ``No. What we have said is we're going to consider all of our options and nothing really is a foregone conclusion.'' He also said passengers should not be fearful of bankruptcy: ``We're going to be much better for this experience -- absolutely no doubt about it.'' Analysts said the rejection of United's request for $1.8 billion in federal loan guarantees all but ensures a Chapter 11 bankruptcy filing. It would be the largest bankruptcy in airline industry history. Standard & Poor's further downgraded United's corporate credit ratings, noting that nearly $1 billion in debt due next week already is considered in default. Credit analyst Philip Baggaley cited the ``disappearance of any realistic possibility'' of paying it off and avoiding bankruptcy. Tilton assured passengers and United's 83,000 employees late Wednesday that ``whatever course we chart, it should be emphatically clear that United will continue to fly.'' Barring an unlikely turn of events, that course will almost certainly take it into federal bankruptcy court as soon as this week. ``We believe bankruptcy is inevitable,'' J.P. Morgan analyst Jamie Baker wrote in a note to investors Thursday. ``I can't imagine them avoiding it unless someone writes them a check for $2 billion,'' said Ray Neidl of Blaylock and Partners. Cash-starved United has said for months that without government backing, it couldn't get the $2 billion private loan it needs to avoid bankruptcy. It faces $920 million in debt payments due next week, which would wipe out most of its fast-dwindling cash. Germany's Lufthansa, which along with United belongs to the 14-member Star Alliance of airlines, said Thursday it was in talks about offering assistance to its embattled partner. ``Lufthansa won't leave a good friend in the lurch,'' said spokesman Thomas Jachnow of Europe's No. 2 airline, although he cautioned that ``whether an investment, cooperation or support in whatever form -- no decision has been taken.'' Should Lufthansa step in, it would want any financial investment to be secured on assets such as planes or real estate, Jachnow said. After the government's rejection of loan guarantees on Wednesday, United's mechanics canceled a vote scheduled for Thursday on $700 million in wage cuts that the carrier said were needed immediately to avert bankruptcy. Union leaders said the panel's ruling rendered the vote moot. United's unions assailed the decision by the government panel, which was created last year to help the financially strapped airline industry recover after the Sept. 11 terrorist attacks. ``We were ready to partner with United, the union coalition and the government to return United Airlines into the nation's premier carrier,'' said Tom Buffenbarger, president of the Machinists' union that represents the 13,000 mechanics and aircraft cleaners who were to have voted. ``Unfortunately, the United States government walked out on that partnership.'' United, the world's largest carrier until American Airlines overtook it last year, traces its problems to a decline in passengers because of the economy and the terrorist attacks, an increase in competition from smaller discount airlines and failed strategies. It has lost more than $4 billion since the middle of 2000 and is on pace for an industry-record loss exceeding $2 billion for the second straight year. The government board said that despite United's efforts to pare costs, including $5.2 billion in proposed labor cutbacks, ``the business plan submitted by the company is not financially sound.'' The board said United's plan ``does not support the conclusion that there is a reasonable assurance of repayment and would pose an unacceptably high risk to U.S. taxpayers.'' Tilton expressed disappointment but didn't say whether the company would file for bankruptcy or file a revised proposal. ``We appreciate, however, the possibility expressed to consider an improved proposal at a later date,'' he said. ``We will consult with our union leaders and other stakeholders and quickly determine what step to take next.'' Two of the three board members -- Treasury's undersecretary for domestic finance, Peter Fisher, and Federal Reserve Board member Edward Gramlich -- rejected United's request. The third member, Kirk Van Tine, the general counsel of the Transportation Department, wanted to defer a decision until Dec. 9 to allow United to submit additional financial information. ``This is not just about costs; it's about a business plan that is fundamentally flawed,'' Fisher said. The board's executive director, Daniel Montgomery, told reporters that United can still file a revised request with the board even if it were to file for bankruptcy. In bankruptcy, United's stock would probably become virtually worthless and it would lose control of its restructuring to a judge. The airline is 55 percent owned by its employees. A person familiar with United's situation said the airline was close to securing $1.5 billion debtor-in-possession financing that would be needed to keep it operating while in bankruptcy. The airline has been in negotiations with several banks organizing the loan, including J.P. Morgan, Bank One and GE Capital, a unit of General Electric, said the person, speaking on condition of anonymity. ^------ AP Business Writer Brad Foss contributed to this report. ^------ ^On the Net: ATSB: http://www.ustreas.gov/offices/domestic-finance/atsb/index.html United: http://www.united.com http://www.nytimes.com/aponline/business/AP-United-Airlines.html?ex=1040123649&ei=1&en=6c371dddf15689de 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