NYTimes.com Article: Source: United Pushes Back Ch. 11 Target

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Source: United Pushes Back Ch. 11 Target

March 18, 2004
 By THE ASSOCIATED PRESS





Filed at 12:58 p.m. ET

CHICAGO (AP) -- United Airlines has pushed back its target
for emerging from bankruptcy from June 30 to late summer as
it awaits verdicts from Washington on its application for a
federal loan guarantee and on pension reform legislation, a
source familiar with the matter said Thursday.

The nation's No. 2 carrier intends to propose a new target
date to U.S. Bankruptcy Judge Eugene Wedoff before its
monthly bankruptcy hearing on Friday, said the source,
speaking on condition of anonymity.

United spokeswoman Jean Medina declined to comment on the
prospective delay, which was first reported in Thursday's
editions of The Wall Street Journal and The New York Times.


The airline said when it filed for Chapter 11 bankruptcy in
December 2002 after incurring more than two years of heavy
losses that it expected to spend about 18 months in
bankruptcy. It spent 2003 slashing labor costs, negotiating
new aircraft leases and obtaining $2 billion in financing
from J.P. Morgan Chase and Citigroup, and told the court in
January it was on track for a June 30 exit.

But the Elk Grove Village, Ill.-based carrier still has
several issues to resolve.

The Air Transportation Stabilization Board, which rejected
United's bid for a federal loan guarantee just before it
filed for bankruptcy, has not ruled on its three-month-old
request for a $1.6 billion guarantee. The exit financing
that United obtained hinges on the loan guarantee being
approved.

United also is in urgent need of pension relief before it
can emerge and is hoping for congressional passage soon of
a bill that would effectively grant airlines a two-year
delay in pension payments. Under current law, United parent
UAL Corp. faces $4.8 billion in required payments to its
pension plan trusts by the end of 2008.

``They've got to get the pension liability issue out of the
way before they can get the loan (guarantee),'' said
airline analyst Ray Neidl of Blaylock and Partners, who was
not surprised by the delay. ``And they need the loan to get
out of bankruptcy.''

A cash crunch for United and other carriers has been
worsened lately by a sharp jump in the cost of jet fuel,
the airline's second-biggest expense after labor. Jet fuel
now costs more than $1.03 a gallon, up 50 percent from two
years ago -- an increase costing United hundreds of
millions of dollars a year.

Also, United faces the risk of financial and other
consequences from a court squabble with some of its
employees. At the behest of the flight attendants' union,
an independent examiner was appointed last month to look
into whether the airline misled its employees about its
plans to reduce retiree health care benefits. The examiner
is to report to the bankruptcy judge on Friday.

^------

On the Net:

www.united.com


http://www.nytimes.com/aponline/business/AP-United-Bankruptcy.html?ex=1080641018&ei=1&en=7f38cc63610ed548


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