Without a federal loan guarantee, United Airlines faces an unacceptably uncertain future, the carrier’s top executive said Wednesday.
Glenn Tilton, in his first interview since taking over as United’s chairman and CEO in September, argued strongly that the carrier has met conditions required for the $1.8 billion loan guarantee and will pursue an aggressive lobbying campaign to prove the carrier’s case to the White House and regulators.
“A lot of people are predicting our failure, and we are working hard to make them wrong,” he said. “I’m convinced that there is significant upside in the United franchise and the United network and a whole suite of things that we will do after we secure the loan.”
Bankruptcy court isn’t the best place to solve the airline’s problems, he insisted.
United is seeking a $2 billion loan from the Air Transportation Stabilization Board, of which $1.8 billion would be guaranteed. Without the loan, the airline has warned it may be forced to file for bankruptcy.
The plan is not “contingent upon a significant industry recovery,” Tilton said. United resubmitted in October a business blueprint to the ATSB to justify issuance of the loan guarantee.
Tilton’s defense of the airline’s loan application came as the carrier stepped up an intense lobbying effort.
On Wednesday, the airline told its employees that it created an e-mail address that customers can use to lend support to the carrier’s efforts to secure the loan guarantee. United said it will forward responses to President Bush and the three members of the ATSB.
Last week, the airline delivered more than 30,000 letters from employees in support of its loan application to members of the ATSB. The move prompted the board the next day to publicly disclose that the carrier’s application was deficient in six areas.
In a wide-ranging interview, Tilton also criticized competitors, including Donald Carty, American Airline’s CEO, for attempting to derail United’s loan application. Last week, Carty told an investor conference that United doesn’t qualify for the loan and that cuts agreed to by its pilots aren’t deep enough.
“Why in this industry there is such a penchant for one executive team to step into the shoes of the other is new to me,” said Tilton, the former vice chairman of ChevronTexaco Corp. He said the airline could no longer remain silent about the misstatements.
“We’re not asking the ATSB to loan money against no change in our cash flow,” Tilton said.
He noted that salary cuts and other changes would quickly halt the red ink that has been flowing since the fourth quarter of 2000. Pay cuts by employees coupled with savings and revenue enhancements would offset the annual losses now being incurred, Tilton said.
So far, three of United’s five unions have agreed to cuts. Over the 5 1/2-year concession period, the Association of Flight Attendants has tentatively agreed to pay cuts of about 3.8 percent, totaling $75 million per year. Members of the United unit of the Air Line Pilots Association are voting on 18 percent pay cuts that would total $400 million per year. And the airline’s 42 meteorologists, represented by the Transport Workers Union, have agreed to 8 percent pay cuts.
United’s largest union, the International Association of Machinists and Aerospace Workers, which represents 37,000 employees, remains in talks with United about the size of the reduction its members will accept.
The nation’s second-largest airline is losing about $9 million per day and has asked Boeing Capital Corp., the financing arm of Chicago-based Boeing Co., and members of the Star Alliance, a worldwide group of airlines, to lend additional financial assistance.
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United faces a loan payment of $375 million on Dec. 2.
Wall Street analysts are estimating that UAL Corp., the parent of United, will lose as much as $2.3 billion this year compared with $2.1 billion in 2001.
United has told the ATSB that it will save $2.5 billion annually through salary cuts, renegotiated supplier agreements and additional revenue.
“We are undertaking extreme forms of self-help by rounding up new money from friends and family,” said Jake Brace, United’s executive vice president and chief financial officer.