CHICAGO, Dec. 3 (UPI) -- United Airlines was buying time Tuesday, invoking grace periods for its debt payments as it pushed for government loan guarantees to avert bankruptcy.
With about $1 billion on hand, the nation's second-largest carrier faced a $375 million payment on enhanced equipment trust certificates, $500 million to Kreditanstalt fur Wiederraufbau, Germany's leading promotional bank, and $45 million on other debt obligations.
The board of directors for United's parent company, UAL Corp., voted Monday to rely on grace periods for all future debt obligations as well "in light of its current financial situation," until it can secure $1.8 billion in federally-backed loan guarantees from the Air Transportation Stabilization Board.
Those guarantees are contingent on $5.2 billion in labor cost savings as well as other cost cuts. All United employees except for mechanics have gone along with concessions packages. The mechanics vote on a revised proposal Thursday. Fifty-seven percent of members rejected a virtually identical plan last week.
"United believes that taking advantage of these grace periods is a fiscally prudent step," United said in a statement.
United has 7 days to meet part of its debt obligation and 10 days to meet the rest.
The airline's precarious financial situation prompted Gov. George Ryan to call a meeting of legislative leaders to determine whether the state can do something to help United win federal government help.
"There is no question that helping United avoid a bankruptcy filing will save more jobs in Illinois," Ryan said.
"United has been an integral part of Illinois' economy for more than 50 years and now more than ever, given the state's tough economic times, we have to fight to save as many jobs as possible."
United already has arranged for $1.5 billion in bankruptcy financing should it be forced into Chapter 11.
Alan Gover, who has served as lead counsel for businesses or major creditors in restructurings, told United Press International generally speaking, United would be better off if it can avoid a bankruptcy filing but at the same time, such a filing would give it more leverage to alter labor pacts if the mechanics refuse to go along with concessions.
"As far as getting a successful concern, compromises are going to be required," Gover said.
More than just jobs are at stake for United employees, who actually own 55 percent of the carrier and have seen their stock drop to near worthless levels. The airline's stock has taken a beating on Wall Street, plummeting from about $80 as recently as January 2000 to $3.17 shortly before noon Tuesday, off 11 cents from Monday's close.
United has been losing some $7 million a day and through the past seven quarters has posted $3.8 billion in losses. More than 20,000 jobs have been eliminated since the Sept. 11, 2001, terrorist attacks, which worsened its already precarious financial situation. The airline currently is flying 1,800 flights a day.
