Bankruptcy and reorganization History of United Airlines

airbus a320-200 landing @ norman y. mineta san jose international airport.

with strong presence on west coast, united benefited dot-com boom boosted traffic (especially premium traffic) san francisco hub. increase temporary , when bubble burst, united in worse position before because had failed keep costs under control, possibly due giving pilots pay raises of 28% in summer of 2000. coupled battered network, post-9/11 decline in air travel , skyrocketing oil prices, company lost $2.14 billion in 2001 on revenues of $16.14 billion. in same year united applied $1.5 billion loan guarantee federal air transportation stabilization board established in wake of september 11 attacks. when iam union failed approve loan guarantee—while other unions approved it—the application rejected in late 2002 , company forced seek debtor-in-possession financing commercial sources cover expected future losses. united made several attempts obtain government loans, enlisting several congressmen , senators help. government rejected application claiming united obtain $2 billion in financing needs emerge protection without federal loan guarantee .

unable secure additional capital, ual corporation filed chapter 11 bankruptcy protection in december 2002. esop terminated, although shares had become virtually worthless. blame bankruptcy has fallen on 9/11, triggered financial crisis in major north american airlines, coupled economic slowdown underway.

united continued operations during bankruptcy, forced cut costs drastically. tens of thousands of workers furloughed, , city ticket offices in closed. airline canceled several existing , planned routes, , eliminated entire latin american gateway , flight crew base @ miami international airport after march 1, 2004. furthermore, reduced mainline fleet 557 (before 9/11) 460 aircraft.

a united boeing 747-400 @ frankfurt airport

at same time, airline continued invest in new projects. on november 12, 2003, launched new low-cost carrier, ted, compete other low-cost airlines. in 2004 launched luxury p.s. (for premium service ) service on re-configured boeing 757-200s jfk airport in new york city los angeles , san francisco. service targeted business customers , high-end leisure customers in coast-to-coast market. in february 2004, airline introduced new blue , white livery blue tulip on tail coincide new advertising campaign.

financial pressure on airline heavy. sars epidemic in 2003 depressed traffic on united s extensive pacific network. spikes in price of jet fuel ate away remaining profits united made. united implemented several fare hikes on overseas routes, citing rising fuel costs, in 2004 , 2005. 2 days after triumphant first flight vietnam, united announced cut u.s. flight capacity 14% after holidays , add more international flights, more profitable.

united took advantage of chapter 11 status negotiate hard-to-cut costs employees, suppliers, , contractors, including cancellation of feeder contracts united express carriers atlantic coast airlines (which became independence air) , air wisconsin (which became airways express carrier).

most controversial of all, however, 2005 cancellation of pension plan, largest such default in u.s. corporate history. renegotiated contracts pilots , mechanics unions , association of flight attendants lower pay. criticism leveled @ ceo, glenn tilton, demanding pay cuts employees while receiving highest salary of major u.s. airline ceo.

originally slated exit bankruptcy protection after 2½ years in third quarter of 2005, united requested yet extension in light of record-high fuel prices. on august 26, 2005, bankruptcy court extended airline s exclusive right file reorganization plan november 1, although stated firmly extension last. united announced @ same time had raised $3 billion in exit financing , filed plan of reorganization, announced, on september 7, 2005.

the bankruptcy court approved restructuring plan on january 20, 2006, clearing way united exit bankruptcy on february 1, 2006, , return normal operations.