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UAL May Seek Cost Cuts, New Funding

United Airlines' parent firm also appeals a U.S. decision to reject its bid for a loan guarantee.

June 19, 2004|From Times Wire Services

United Airlines parent UAL Corp. said Friday that it might seek new capital and make additional cost cuts, one day after a U.S. government board rejected a $1.6-billion loan guarantee while leaving open the possibility of reconsidering the bid.

The company appealed the ruling by the three-member Air Transportation Stabilization Board and expected an answer within days, UAL bankruptcy lawyer James Sprayregen said.

Contending that its willingness to accommodate change to its financial blueprint was overlooked, the company informed the board that it was willing to modify its loan application and would do so in the coming days.

Also on Friday, U.S. Bankruptcy Judge Eugene Wedoff formally granted the latest in a series of United requests for more time to file a reorganization plan without competition from outsiders, pushing the deadline back a month to July 30.

The more pressing issues for United are where its exit financing will come from and whether the board's decision, if not reversed, will keep the airline in bankruptcy protection into a third year.

Chicago-based United, the world's second-largest airline, built a plan to exit bankruptcy protection on getting a guarantee that would back most of a $2-billion loan from J.P. Morgan Chase & Co. and Citigroup Inc. The airline, with $8.6 billion in net losses since 2000, is cutting $5 billion in annual costs, half from labor.

"This will force United Airlines to go back to labor and go back to creditors and get deeper concessions, which is exactly what should happen," said Dorothy Robyn, a Brattle Group consultant in Washington and an advisor on aviation issues during the Clinton administration.

Associated Press and Bloomberg News were used in compiling this report.

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