United sees $877M Q1 loss; warns liquidation is possible CHICAGO (Reuters) =97 Bankrupt United Airlines forecast a first-quarter=20 operating loss of $877 million and said for the first time publicly that=20 going out of business altogether is a "distinct possibility" as war looms.= =20 UAL Corp.'s United said domestic bookings are down and international=20 bookings have dropped 40% in the last week alone, due to the impending Iraq= =20 conflict. The world's second-largest airline turned much more pessimistic=20 about its future this week as war appeared imminent. In papers filed with=20 the bankruptcy court Monday, United said it might cease operations=20 altogether without labor cost reductions from major unions. "With war-related jitters increasing and fewer people purchasing tickets,=20 United's near-term revenue forecast through June 2003 has deteriorated by=20 $298 million from projections made just weeks ago," the company said. "At=20 the same time, the cost of fuel, United's second-largest operating expense,= =20 has gone in the opposite direction." "In the wake of the deadlines that=20 have recently been set for Iraq to disarm, United's bookings have begun to= =20 drop substantially," it said. "Domestic bookings have recently declined ...= =20 the drop in international bookings has been more dramatic." United's latest= =20 assessment was a stark a departure from recent announcements by United that= =20 daily cash flow was positive in January and it was beating the first set of= =20 financial requirements set by bankruptcy lenders. "Liquidation is a=20 distinct possibility if United does not receive its proposed labor cost=20 reductions," the airline said. "The consequences of liquidation for all=20 United stakeholders would be catastrophic. In particular, liquidation would= =20 mean that all of United's employees would lose their jobs." WASHINGTON READY Washington is apparently watching. U.S. Transportation Secretary Norman=20 Mineta Tuesday said the Bush administration stood ready to aid the industry= =20 if airlines suffer further from the war. Immediately after the Sept. 11.=20 2001, attacks, the federal government doled out $5 billion in direct aid=20 and set up a program to provide up to $10 billion in loan guarantees. "We=20 will be ready to move very quickly if the need arises," Mineta said at an=20 aviation industry conference. Elk Grove Village, Illinois-based United =97= =20 which lost an earlier bid for such loan backing =97 said initiatives so far= =20 to cut costs will not return it to profitability. UAL lost a record $3.2=20 billion in 2002, about a quarter of the $11 billion in net losses by all=20 top eight U.S. carriers combined. United is planning to create a low-cost carrier division that it hopes will= =20 recapture traffic lost to discount rivals like Southwest Airlines. In the=20 court filing, however, it said it was willing to consider alternatives to=20 that plan, which has been sharply criticized by unions, especially the= pilots. SOARING FUEL COSTS Unhedged on its jet fuel purchases for the entire year, United now sees=20 fuel prices in 2003 19% higher than it projected in December, when it filed= =20 for bankruptcy. As a result of the higher costs and lower revenues, United= =20 will violate its debtor-in-possession financing covenants starting in May=20 2003, even with temporary wage cuts that are saving $70 million monthly. In the wake of the Sept. 11, 2001, attacks, United cut about 20% of its=20 workforce and 20% of its flight schedule, reduced other expenses and tried= =20 to restructure its financial obligations. But those efforts could not=20 offset weak revenue, and after the U.S. government denied an application=20 for $1.8 billion in backing of private-sector loans, the airline filed the= =20 largest aviation bankruptcy in history on Dec. 9. REJECTING CONTRACTS After winning temporary wage cuts from its unions, United is now seeking to= =20 throw out its collective bargaining agreements altogether. Weeks of talks=20 yielded no deal on $2.56 billion annually of longer-term concessions the=20 airline wants. United said it is not alone in its troubles, noting=20 Continental Airlines also recently forecast rough times ahead in=20 transAtlantic travel. "Other carriers, such as Delta, Japan Airlines and=20 others, have also felt the conflict's effect on bookings," it said. "The=20 difference between United and its competitors is that, because the company= =20 is in Chapter 11, United must disclose its Iraq contingency plans." United= =20 said it has already met with a representative of its DIP lenders to ask for= =20 a relaxation of the loan covenants. Four institutions put up $1.5 billion=20 in financing for United =97 J.P. Morgan Chase & Co Inc., Citigroup Inc., CIT= =20 Group Inc. and Bank One Corp.. Lenders said they needed hard data from=20 United on the effects of the war, which they assumed would not be available= =20 until after it started, according to United. More meetings are scheduled=20 for this week. UAL shares, which traded at more than $100 each in the late= =20 1990s, fell 2.3% on the New York Stock Exchange to 84 cents. Shares of its= =20 biggest competitors, AMR Corp. and Delta, were higher. *************************************************** The owner of Roger's Trinbago Site/TnTisland.com Roj (Roger James) escape email mailto:ejames@xxxxxxxxx Trinbago site: www.tntisland.com Carib Brass Ctn site www.tntisland.com/caribbeanbrassconnection/ Steel Expressions www.mts.net/~ejames/se/ Site of the Week: http://www.thehummingbirdonline.com TnT Webdirectory: http://search.co.tt *********************************************************