=20 ---------------------------------------------------------------------- This article was sent to you by someone who found it on SF Gate. The original article can be found on SFGate.com here: http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2003/02= /01/BU13397.DTL ---------------------------------------------------------------------- Saturday, February 1, 2003 (SF Chronicle) Huge loss at United/2002 deficit rose to $3.2 billion David Armstrong, Chronicle Staff Writer United Airlines on Friday posted a staggering $3.2 billion loss for 2002, by far the largest in the bankrupt company's history, as the carrier struggled to sell a still murky restructuring plan to creditors, lessors and angry unions. The deficit easily surpassed United's loss of $2.1 billion for 2001, an aviation industry record at the time. This past year, United -- which employs 16,000 people in Northern California -- didn't bleed quite as badly as American Airlines, which set a new industry standard, losing $3.5 billion. United's parent company, UAL Corp., which filed for Chapter 11 bankruptcy protection Dec. 9, blamed losses largely on continuing high labor costs and spiking prices for jet fuel. UAL lost $1.5 billion in the fourth quarter alone. That's way up from its loss of $308 million in the fourth quarter of 2001, when United, like the rest of the U.S. airline industry, was reeling from the terrorist attacks of Sept. 11. The huge 2002 loss was expected by airline industry analysts, who said United's road out of Chapter 11 will be bumpy, winding and steep. "They have to cut their cash-bleed," said Ray Neidl, an analyst with Blaylock and Partners. "The next eight weeks are extremely crucial," said Neidl, whose firm does not do business with United and who doesn't own UAL stock. "They've got to get their business plan out, and make sure it's rational. And their aircraft lessors, creditors and others have got to come to reality and understand that there will be major changes in their arrangements with the airline." Those changes are still very much up in the air. On Friday, General Foods Credit Corp., a unit of Altria Group Inc., said it plans to repossess 18 jetliners from United next Saturday if it can't reach agreement with the carrier on new lease terms. United has enough flexibility in its fleet and routes to "enable us to reject leases like these, while continuing to provide service to the customer, " spokesman Jeff Green told Bloomberg News. Neidl said that UAL's chief executive, Glenn Tilton, who took the airline's top job in September after a career in the oil industry, seems to be getting a handle on United's problems. United has not released details of its recovery plan, which was approved by the UAL board of directors in their meeting at company headquarters in Chicago on Thursday. But the company has said that one key component would be the launch of a still unnamed low-fare airline to compete with Southwest, JetBlue and Frontier airlines. United's pilots and flight attendants unions, fearing the new carrier wi= ll pay workers lower wages and weaker benefits, denounced the plan. Air Line Pilots Association spokesman Paul Whiteford, who sits on the UAL board of directors, said his union will oppose the new carrier "with every lawful means available to us." Michael Boyd, principal of the aviation consulting firm Boyd Group, said union opposition was only one factor working against the low-cost carrier -- and a full recovery for United. "This one won't fly. You can't do two products. Continental tried a low- cost carrier -- didn't work. USAir tried it -- didn't work. United tried it already with Shuttle by United -- didn't work," he said. Boyd blamed Tilton's inexperience in the airline industry for the low-fa= re carrier idea, and said Tilton should have purged senior UAL executives who stayed on from previous regimes. "Their real problem," Boyd said of United, "is they're losing their core business traveler." Business travelers, he said, are put off by high walk- up fares and are turning to low-cost carriers like Southwest to save money, or embracing the Internet and videoconferencing instead of flying. United said it will present its business plan to its creditors' committee Monday and the unions next week. The company said it needs to save $2.4 billion a year on labor costs. United's pilots have accepted a 29 percent wage cut, the flight attendants have taken a 9 percent wage cut, and federal bankruptcy court imposed a 14 percent cut on mechanics and machinists at UAL's request. UAL stock closed at $1.02 Friday on the New York Stock Exchange, down 5 cents from $1.07. E-mail David Armstrong at davidarmstrong@sfchronicle.com.=20 ---------------------------------------------------------------------- Copyright 2003 SF Chronicle