4 February 2006

United Airlines Back On Track

US Airline Ends 3-Year Bankruptcy Recovery

United Airlines finally left bankruptcy protection this week, ending a painful, three-year restructuring that thinned their work force, slashed wages and shrank the airline's fleet of planes.

United, the second-largest air carrier in the USA, made drastic changes to bring its costs in line with its competitors. Its parent company, UAL Corp. has to compete in an era where high fuel prices have made it difficult for any airline to make a profit.

United struggled through its bankruptcy for more than 1,000 days, while creditors examined each and every spending decision and strategic move.

Bankruptcy protection ended about noon Wednesday when documents were filed with the U.S. Bankruptcy Court in Chicago confirming the carrier's reorganization plan.

Elk Grove Township-based United sought Chapter 11 protection on Dec. 9, 2002. Some experts predicted the company, or at least its management team, would not survive the process.

Chief Executive Glenn Tilton said Wednesday that he never doubted the bankruptcy's outcome, but he called it only the first step in an ongoing process.

"It feels as if we have created an opportunity for ourselves," Tilton said. "That's all it really is. We've reset our competitiveness, and now we have the opportunity to compete with everybody on a level playing field and take advantage of the distinct attributes we have."

During the past three years, United cut about 22,000 jobs and reduced labor costs by $4 billion. It also sold off 20% of its aircraft. More than $7 billion in costs were slashed.

United are out of the red, but significant challenges remain. The airline hasn't shown a profit since the year 2000, when it made $50 million. United's financial projections predict a profit this year, but that assumes oil prices will stay at $50-a-barrel. And although oil prices fell on Wednesday, they remained above $66 a barrel.

United Airlines has no significant fuel hedges in place to offset the impact of high prices, unlike some of its competitors. So only time will tell if they can make it back into the black.