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The Spokesman-Review Newspaper
Spokane, Washington  Est. May 19, 1883

United regroups after losing loan guarantee


A United Airlines jet is shown in a photo released by the company this year. The Air Transportation Stabilization Board late Thursday denied United's request to guarantee $1.6 billion of a $2 billion private loan, leaving the status of the airline's makeover in question.
 (File/Associated Press / The Spokesman-Review)
Dave Carpenter Associated Press

CHICAGO – United Airlines worked to strengthen its case for government financial backing Friday, its bankruptcy plans in limbo after a federal board’s initial ruling that its requested $1.6 billion loan guarantee isn’t needed.

Contending that its willingness to accommodate change to its financial blueprint was overlooked, United informed the Air Transportation Stabilization Board that it accepted the panel’s offer to modify its application and will do so in the coming days.

The company expects its appeal to be resolved in “a matter of days, not weeks,” United bankruptcy attorney James Sprayregen told a federal bankruptcy judge.

The ambiguity has left creditors and unions to speculate about the possibility of further concessions after 18 months of deep cost-cutting in bankruptcy.

CEO Glenn Tilton returned from Washington on Friday and conveyed an upbeat message to employees, emphasizing that the board “clearly left the door open to further discussion.” He did not outline what changes might be in store beyond saying the company will focus on containing costs wherever possible.

“While the ATSB voted not to approve the application, their rationale for doing so was in fact an endorsement of both the hard work that we’ve done to date and the fundamental strength of the company’s business plan,” he said on an employee hotline.

“We’ll continue to work with the board in the days ahead,” he said.

U.S. Bankruptcy Judge Eugene Wedoff formally granted the latest in a series of United requests for more time to file a reorganization plan without competition from outsiders, pushing the deadline back a month to July 30 and saying he will consider an additional extension next month.

The more pressing issues for United, however, are where its exit financing will come from and whether the ATSB rejection, if not reversed, will keep the airline in bankruptcy into a third year.

The board said in its announcement late Thursday that United’s prospects have improved and airline credit markets have picked up, making it more likely the Chicago carrier can find a loan without government backing.

Asked about that assertion, United chief financial officer Jake Brace said banks’ willingness to provide financing has so far been linked solely to the airline getting the loan guarantee.

Brace declined to say what modifications to the loan guarantee application were under consideration, only that they entailed “various enhancements” that have been discussed with the board.