The Air Transportation Stabilization Board this morning informed United Airlines parent UAL Corp. that its decision to reject the company's second application for a federal loan guarantee remained unchanged, effectively ending the company's bid for federal support. Having received notification of the rejection of a request for guarantees backing $1.6 billion in financing
(BTN, June 21), bankrupt UAL last week altered its application in a last-ditch attempt to secure approval.
"After carefully considering the additional financial information submitted as part of United's request for reconsideration, the board determined that this information does not alter in a material manner the rationales underlying the board's June 17 decision," said ATSB executive director Michael Kestenbaum, in a letter this morning to UAL CFO Frederic F. Brace. "The board will not accept any further submissions from United with respect to the application."
United's resubmitted application reportedly sought only $1.1 billion in loan guarantees and included other terms designed to be more acceptable to the three-member ATSB panel. Two of the agencies represented on the board, the U.S. Treasury Department and the U.S. Department of Transportation, had left the door open for UAL to modify its second application, causing many to speculate that political pressures were being applied on behalf of UAL.
The final ATSB rejection likely will prolong UAL's Chapter 11 bankruptcy reorganization and force the company to use its own devices--notably additional cost cuts--in securing financing necessary for emergence from court protection. One source of fresh capital could come from asset sales, though at this point it is unclear if, or to what degree, UAL plans to shrink its global network.
"While we disagree with their decision, we are gratified by the ATSB's public recognition of our progress and are already moving forward to secure the exit financing we need to take United out of bankruptcy," UAL said in a statement. "The message from the ATSB is that we can get the exit financing we need on our own."
The latest decision by ATSB likely was its last as the panel has no pending applications. Since being formed by Congress in the wake of the 2001 terrorist attacks, the board approved loan guarantees for US Airways, America West, ATA Airlines (then American Trans Air), Frontier and Aloha airlines, as well as a few cargo carriers. It rejected applications submitted by several smaller carriers, including Spirit Airlines and now-defunct National and Vanguard airlines.