United looks for exit financing

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United looks for exit financing

CHICAGO (Reuters) =97 Bankrupt United Airlines Monday said it has started=20
preliminary talks to secure financing for its eventual exit from bankruptcy=
=20
protection but so far the amount it may want is unknown. Potential options=
=20
for money include using loan guarantees from the federal government or=20
private equity funds including possibly from banks, said sources familiar=20
with the matter. Jeff Green, a spokesman for United, confirmed to Reuters=20
that initial discussions about exit financing have begun. "We've had=20
conversations with (financial backers) on both the debt and equity sides,=20
but it's really been just that =97 conversations," Green said. Green said=
 how=20
much, if any, money United will seek is unclear at this point. The airline=
=20
is on record saying it is considering both the fourth quarter of 2003 and=20
the first quarter of 2004 to emerge from court protection. "We're looking=20
at the fourth quarter, we're looking at the first quarter," he said. "We=20
haven't made any determination." The airline's board of directors is=20
meeting on Monday and will be discussing a business plan to become=20
financially viable, sources said. The plan is not the formal reorganization=
=20
plan required by the court. It will also be presented to creditors'=20
committee on Wednesday.

Business plan awaited

Other than reducing costs, details of the business plan are not yet known.=
=20
Green declined to comment on what it contains or when it will be released=20
publicly, including the possible launch of an low-cost, no frills airline=20
within an airline.
Analysts and union sources have told Reuters that United's so-called=20
"Starfish" low-cost carrier endeavor has become less essential after the=20
airline won huge hourly pay cuts on Airbus A320s and Boeing 737s. Delta Air=
=20
Lines has launched its own low-cost unit named Song, but its reach is very=
=20
limited. United, the world's second largest airline, a unit of UAL Corp.,=20
filed for bankruptcy in December after failing to win backing from the=20
federal government for $1.8 billion in loans needed to make huge debt=20
pavements. It predicted an 18- to 24-month stay. Just prior to the=20
bankruptcy filing =97 which was the largest in U.S. aviation history, the=
 Air=20
Transportation Stabilization Board in Washington, D.C., said United's=20
business plan submitted in support of its loan application was flawed.

Back to Uncle Sam?

But the ATSB, an agency created to dole out up to $10 billion in loan=20
guarantees after the disastrous Sept. 11, 2001, attacks, also left the door=
=20
open for United to return. The airline earlier this year won $2.5 billion=20
in annual labor concessions and has other cost cuts in place. A rival=20
airline, US Airways Group, filed for bankruptcy protection last August and=
=20
emerged March 31, after the Retirement System of Alabama put up money and=20
unions gave big concessions. The ATSB backed an exit loan from Bank of=20
America. In United's case, $1.5 billion in bankruptcy loans called=20
debtor-in-possession financing came from Citigroup Inc., J.P. Morgan Chase=
=20
and Co. Inc., CIT Group and Bank One Corp.. Sources said any of of those=20
institutions could also provide exit financing. In an unprecedented=20
financial crisis, the nation's major airlines continue to struggle to turn=
=20
a profit and will not see positive year-over-year traffic figures until at=
=20
least the end of the year, said J.P. Morgan analyst Jamie Baker. "The=20
airline environment is anticipated to be more hospitable than it was in=20
December, 2002," Baker said. "If and when United emerges, it will be under=
=20
clearer but by no means sunny skies."

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