For 3rd time, United is denied federal aid :: Namibia Internet Gateway cc ::

Articles: For 3rd time, United is denied federal aid

Posted by admin on Tuesday, June 29, 2004 - 12:47 AM

United Airlines began a search for investors yesterday after it failed on its third try to win the federal assistance it hoped would pave its way out of bankruptcy.
The 3-0 vote by the Air Transportation Stabilization Board ends nearly two years of efforts by United, the nation's second-largest airline, to secure loan guarantees. The board was formed after the September 2001 attacks to administer $10 billion in loan guarantees. The move meant little in the short term for United or its passengers. But the action put pressure on management to find lenders willing to provide it with at least $2 billion to help it become solvent. Analysts said United, which has resisted a breakup, ultimately might be forced to sell some of its operations. And the airline undoubtedly will face another deep round of cost cuts, something it warned employees last week to expect. United filed for bankruptcy protection in December 2002, after the board rejected its original application, made in June 2002, for $1.8 billion in loan guarantees. The airline was counting on a combination of federally backed loans plus private assistance to emerge from bankruptcy. In December 2003, United filed its second application, for $1.6 billion in loan guarantees. It had lined up $2 billion in exit financing from JP Morgan and Citibank, including $400 million in financing provided by the banks. But the loan board, in rejecting the airline's second application, said United had failed to qualify on two counts unrelated to financing. The board said United failed to prove it was a "necessary part" of the nation's aviation system. Further, the board said, the airline was not shut out of capital markets. It said it was convinced United could survive without federal help.

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