United vows no disruptions By Marilyn Adams and David Kiley, USA TODAY United Airlines began flying Monday as a carrier under bankruptcy=20 protection, promising customers smooth operations even as it faces=20 unprecedented internal turmoil. The world's second-biggest airline by=20 revenue became the largest carrier ever to seek Chapter 11 protection from= =20 creditors. The filing came Monday in U.S. Bankruptcy Court in United's=20 hometown of Chicago after a unanimous board vote Sunday. Officials said=20 Chapter 11 became the only option after United's application for a $1.8=20 billion federal loan guarantee was denied last week and the airline's high= =20 costs and debts threatened to ground it. "This is a story about a company=20 that's struggling to reinvent itself," Glenn Tilton, CEO of United parent=20 UAL, said in an interview. Tilton said his goal was for United to emerge=20 from bankruptcy protection in 18 months, but industry observers said that's= =20 optimistic. "This is going to be a very long bankruptcy and a very painful= =20 bankruptcy," said Darryl Jenkins of George Washington University's Aviation= =20 Institute. Tilton acknowledged that in the future, the airline won't be the behemoth=20 it is now. "We have to be smaller, nimbler, more responsive. We will have=20 to compete in a more disciplined way with lower costs," he said outside the= =20 packed courtroom. "We will trim unprofitable routes and serve destinations= =20 with fewer people." Court testimony Monday revealed how stark United's=20 situation has become. UAL attorney James Sprayregen said United has $800=20 million in cash on hand for operations but was on track to run out by=20 January. Without fresh capital, United's cash balance would have plunged to= =20 $300 million by the end of December, he said. UAL's request to tap $800=20 million in special bankruptcy financing in 10 days was approved by Judge=20 Eugene Wedoff, chief of the Bankruptcy Court. A group of lenders including= =20 J.P. Morgan Chase, Citigroup, Bank One and CIT Group is prepared to provide= =20 a total of $1.5 billion in financing. The bankruptcy promises to be the=20 most complex in airline industry history. The list of details about UAL's=20 creditors fills 32,000 typed pages, Sprayregen said. Lawyers for United's=20 creditors packed the courtroom in downtown Chicago, and the 60 biggest=20 unsecured creditors, who have the most to lose, are scheduled to meet=20 Friday at a Chicago hotel. "Make no mistake about it. This will be a difficult process. Sacrifices=20 will have to be made by all constituents," said Sprayregen of law firm=20 Kirkland & Ellis. United announced no management changes Monday, although=20 many industry watchers expect a shake-up. The airline's former president=20 and chief operating officer were forced out in September when Tilton, a=20 former Texaco executive, was hired as chairman and CEO. The airline=20 announced that its officers and management employees would take pay cuts of= =20 about 11% starting next week. Founded 76 years ago, United is a=20 traditional, high-cost carrier that has historically catered to=20 premium-fare business travelers. It maintains expensive hubs at Chicago,=20 Denver, Washington, San Francisco and Los Angeles and operates routes=20 throughout Europe, Latin America and Asia. Since the Sept. 11 attacks, United has cut its daily flights by 25% and=20 laid off about 20,000 employees. But the cost cuts haven't been enough to=20 compensate for a precipitous falloff in high-fare business travel, United's= =20 relatively expensive labor contracts and the encroachment of low-fare=20 airlines like Southwest and Frontier into United's markets. Tilton said the= =20 airline's business plan going forward will include initiatives to compete=20 against discount airlines, but he wasn't specific. "United has to appeal to= =20 a broader base of customers than we have," he said. If United can=20 streamline and keep pampering business fliers while competing for leisure=20 travelers against cutthroat discount airlines, it could force major changes= =20 at other airlines. Tilton boasted that the airline's operation Monday was=20 flawless =97 on time with no disruptions =97 despite the filing. No= immediate=20 changes to United's flight schedule were announced. United's Mileage Plus=20 frequent-flier program and Red Carpet Clubs weren't affected. He stopped by Chicago O'Hare airport, United's biggest hub, to hug=20 employees and thank passengers for their loyalty. Paul Whiteford, chairman of United's pilots union, said employees are=20 prepared to do their best to "knock the crap out of the competition. We=20 need to focus on keeping our customers." Unique United Tilton did not address a particularly sensitive subject: the future of=20 UAL's controversial governance structure. United is the only airline with=20 union representatives on its board of directors. Through an employee stock= =20 plan established eight years ago, employees own 55% of UAL, and United's=20 two most powerful labor unions, the International Association of Machinists= =20 and the Air Line Pilots Association, have board seats. Industry experts=20 have blamed the unions' influence for many of United's problems, but union= =20 leaders blame poor management decisions and costly business blunders, like= =20 United's attempt to acquire US Airways two years ago. Tilton would say only that the future of the ownership plan and governance= =20 structure "will evolve through this process." Whiteford said it's too early to know how the filing will affect the stock= =20 ownership plan. But he said he has no reason to believe he won't be a board= =20 member when United emerges from protection. Although Tilton pledged to seek= =20 labor cost cuts through amicable negotiations, the company can ask the=20 bankruptcy judge to impose concessions. The unions have retained their own= =20 lawyers. While United was applying for the loan guarantee, union and=20 non-union employees pledged to give up $5.2 billion in pay and benefits=20 over 5 1/2 years. The airline initially sought $9 billion over six years.=20 Tilton said the lower figure "will be a starting point" for negotiations=20 now. "There's clearly a gap." Tilton said UAL would also seek work rule=20 changes, such as reducing the number of pilots on some international=20 flights. Under its contract with its pilots, United exceeds the minimum=20 requirements set by the Federal Aviation Administration. "I'd rather have=20 productivity improvements," Tilton said. "We're going to have conversations= =20 with our unions that we weren't able to have before." Tilton said United officials weren't expecting to be denied the federal=20 loan guarantee. He said they had hoped for conditional approval contingent= =20 on goals being met before money was advanced. Wall Street analysts, who had= =20 long predicted the Chapter 11 filing, viewed it as the most dramatic sign=20 yet of a sea change in the airline industry. US Airways, a much smaller=20 major airline, slipped into bankruptcy protection in August. Other big=20 airlines, including American and Delta, have announced thousands of new job= =20 cuts. "This is part of the restructuring process ongoing in the industry=20 and will ultimately result in fewer network carriers and fewer hubs," said= =20 analyst Brian Harris of Salomon Smith Barney. But for United's 83,000=20 workers, Monday's news was a lot more personal. "I'm going to retire a lot= =20 less comfortably now, if I make it to retirement," said United mechanic=20 Dennis Sanderson, who works at Washington Dulles airport. As a result of=20 earlier layoffs, Sanderson, who is about two years from retirement, is 16th= =20 from the bottom in seniority at Dulles. If there's another round of layoffs= =20 at Dulles, he said, "I'm gone." Contributing: Barbara DeLollis The owner of Roger's Trinbago Site: Roj (Roger James) *************************************************** escape email mailto:ejames@escape.ca Trinbago site: http://www.tntisland.com CBC Website http://www.tntisland.com/caribbeanbrassconnection/ The Trinbago Site of the Week: (TnT News) http://www.tntmirror.com/ (TnT News) courtesy of Roj Trinbago Website & TnT Web Directory Roj's Trinbago Website: http://www.tntisland.com TnT Web Directory: http://search.co.tt *********************************************************