United Plans to Cut 9,000 Additional Jobs, Make Profit in 2004
United Airlines, racing to avoid bankruptcy, Sunday released more details of a business plan aimed at getting a $1.8-billion federal loan guarantee, including shrinking itself by about one-quarter and making an operating profit in 2004.
The No. 2 U.S. airline said it expects about 9,000 more job cuts from its staff of about 83,000, but gave no details about a timetable or where they would originate. Before the Sept. 11 attacks threw the airline industry into havoc, United had about 100,000 workers.
United’s parent, UAL Corp., posted billions of dollars in losses last year and in 2002 as the industry remained mired in a historic downturn.
The carrier said it will be cutting its flight schedule, also known as capacity, by an additional 6% in 2003, leaving the airline about 23% smaller than it was before Sept. 11.
United, the biggest airline operating at Los Angeles International and San Francisco airports, did not say where it plans to cut flights.
In details submitted in a financial recovery plan to the Air Transportation Stabilization Board, UAL also said it expected to retire an additional 49 aircraft. The company is based in Elk Grove Village, Ill.
The airline has asked the ATSB to guarantee $1.8 billion of a $2-billion loan. The carrier released details to the public at the same time it got the word out to employees, United spokesman Rich Nelson said Sunday.
The key to an expected turnaround is $2.5 billion in annual profit improvements, including $1.1 billion in annual labor cost savings and an additional $1.4 billion a year in non-labor cost savings and revenue enhancements, United said.
The airline is engaged in an all-out public relations campaign to win approval of the loan backing, but sources familiar with the matter say it might backfire or the government may delay a decision, in effect putting the airline into bankruptcy anyway.
Last week, United confirmed it was talking to major banks about getting $2 billion in “debtor-in-possession” financing to keep operating in the event of a bankruptcy filing.
Many Wall Street analysts have said United’s plan may not be enough to persuade the government to back the loan.
“The odds are still against an approval,” Blaylock & Partners airline analyst Ray Neidl said. “Are the concessions all ‘hard dollars’ is the question that the ATSB and analysts are asking.”
United has cash on hand, but is burning through it so quickly that a debt payment of $375 million due Dec. 2, which cannot be renegotiated, would push its reserves too low.
Among big labor groups, the leaders of the pilots and flight attendants unions recently agreed to take pay cuts and are having their memberships vote on the tentative deals. But machinists, represented by the International Assn. of Machinists, have not struck a deal.
Friday, UAL stock closed at $2.95, down 17 cents, on the New York Stock Exchange.
