CHICAGO, Dec. 5 (UPI) -- Union officials Thursday accused the Air Transportation Stabilization Board of exceeding its statutory authority in denying government-backed loan guarantees to United Airlines, pushing the nation's No. 2 carrier closer to bankruptcy.
United began the week with an estimated $1 billion in cash reserves and $920 million in debt obligations due. Late Wednesday, the ATSB, which was set up to dole out help to the airlines in the wake of the Sept. 11, 2001, terrorist attacks, rejected United's request for $1.8 billion in federal loan guarantees, calling the airline's reorganization plan flawed and unlikely to lead to the repayment of any loans.
"We are extremely disappointed by the decision and do not agree with the board's analysis nor the timing of the announcement," the executive committee of the Air Line Pilots Association said in a recorded announcement on its Web site. ALPA said the ATSB's job is to "stabilize not reorganize" the airline industry.
Tom Buffenbarger, international president of the International Association of Machinists and Aerospace Workers, said the ATSB had failed miserably in its mandate and called the board's action irresponsible.
United had sought $5.2 billion in wage and benefit concessions from employees, including $1.5 billion from machinists. In a vote last week, some members of the machinists union approved their share of the givebacks but 13,000 mechanics voted against the package. A flurry of weekend negotiations produced a slightly altered agreement and machinists had been scheduled to vote on the new pact, the last piece of the concession package, Thursday. Buffenberger said the ATSB action made such a vote pointless and canceled it.
Standard & Poor's Thursday downgraded United's credit rating for the second time this week.
United worked through the week to line up bankruptcy financing should a Chapter 11 filing become necessary. The airline reportedly was seeking $1.5 billion in debtor-in-possession financing to tide it over during reorganization.
Fifty-five percent of United is owned by employees but trading in the airline's stock was suspended on the New York Stock Exchange after it plunged $1.84 shortly after the open to $1.24. Trading resumed later in the session and the stock closed at $1.01, off $2.11 for the day. As recently as January 2000, the stock was trading at $80.
This is not the first time United has been at the brink. In 1993, unions approved $4.5 billion in concessions in exchange for stock to keep the carrier flying. At the time, the stock was trading at $148.50 and later split. But the employee takeover did little to allay contentious labor-management relations.
Unlike the nation's other carriers, United's most recent troubles began long before the terrorist attacks. Passengers fled to other airlines after pilots staged a slowdown during the summer of 2000, disrupting the travel plans of millions.
"That's when I switched to American," frequent flyer Robert Kieckhefer, an executive with Blue Cross-Blue Shield of Illinois, said. "And I had been flying United almost exclusively since 1983."
Broadcast reports indicated United's passengers had little sympathy for the airline's financial plight, saying it had been "terribly mismanaged" for the past decade or so.
At the end of the third quarter, United was losing $7 million a day and had not posted a profit in seven quarters. Estimates of current losses range as high as $9 million a day.
In its statement Wednesday, the ATSB left the door open for reconsideration at a later date and United officials said they would meet with union officials and their other constituents to determine the next step.
"Whatever course we chart, it should be emphatically clear that United will continue to fly," UAL Chairman, Chief Executive Officer and President Glenn F. Tilton said.