CHICAGO, Dec. 4 (UPI) -- The Air Transportation Stabilization Board Wednesday turned down United Airlines' request for $1.8 billion in loan guarantees, a move making bankruptcy by the nation's second largest carrier likely.
United had been working feverishly to stave off a Chapter 11 filing, negotiating $5.2 billion in wage and benefit concessions from employees and trimming another $60 million from company officers' compensation packages as well as $7.7 billion in cuts from vendors and other sectors.
United chief Glenn Tilton said he was "disappointed" in the ATSB decision, which came one day before mechanics, who initially rejected concessions, were to vote on their share of the giveback package.
"We believe that the work we've accomplished in developing our ATSB proposal will serve us well as we build out platform for the future, regardless of the path we take," Tilton said.
"Whatever course we chart, it should be emphatically clear that United will continue to fly."
The ATSB issued a statement saying United's proposed business plan "is not financially sound" and revisions proposed by e-mail and fax late Tuesday "are highly unlikely to change (the) assessment of United's proposal.
"This plan does not support the conclusion that there is a reasonable assurance of repayment and would pose an unacceptably high risk to U.S. taxpayers," the ATSB concluded. Two of the board's members voted against approving the loan guarantees. The third sought to defer action until next Monday.
American, Continental and Northwest airlines had raised questions about United's ability to repay loans if the guarantees were issued, calling its revenue projections "highly optimistic" in the current climate. Continental issued a statement after the ATSB decision saying the government "did the right thing."
United has been working on $1.5 billion debtor-in-possession financing in the event of an ATSB rejection. The airline is believed to have had $1 billion on hand Monday when it invoked 7- to 10-day grace periods on $920 million in loan obligations. Last quarter, United was losing $7 million a day.
The Federal Aviation Administration also fined United $805,000 this week for operating three improperly maintained Boeing 757s.
"After discovering small holes in the spoilers of the aircraft, maintenance workers performed a temporary repair of the spoiler skin that was not within approved methods, techniques or practices in the current manufacturer's repair manuals," the FAA said. "Further, the FAA alleges that United Airlines continued to operate the aircraft when they were not in an airworthy condition."
The FAA said the ill-repaired planes made 193 flights.
United began running into financial difficulties long before the Sept. 11, 2001, terrorist attacks sent the travel industry into a tailspin and has been working feverishly in recent months to trim costs.
House Speaker Dennis Hastert, R-Ill., and Sen. Dick Durbin, D-Ill., had lobbied hard on United's behalf. Gov. George Ryan proposed a state loan of $200 million to prod the ATSB toward approval but Illinois' other senator, Republican Peter Fitzgerald, a former banker, said he would have to see United's books before he could back any loans.
Transportation Secretary Norman Mineta recused himself from the bailout process because his wife is a former United flight attendant.
United, which is 55 percent owned by workers, employs some 83,000 people. Its stock, which traded as high as $80 as recently as January 2000, closed at $3.12 Wednesday, up 7 cents. Immediately after the announcement, the stock plunged $1.35 in after-hours trading.