UAL Sets Bankruptcy Timeframe

United Airlines parent UAL Corp. today said it will file for Chapter 11 bankruptcy protection this fall unless it dramatically lowers costs. The carrier cited feedback from the Air Transportation Stabilization Board on a request for federal loan guarantees, $875 million debt payments due in the fourth quarter and an inability to access public capital markets. United's would-be codeshare partner US Airways began bankruptcy reorganization on Sunday night.

"Revenue isn't coming back the way the industry expected. Demand isn't returning, fares remain low and the industry is grappling with how to respond," said interim CEO Jack Creighton.

Without being specific, United said new changes to its business plan are "urgent, significant and immediate." It has set a 30-day timeframe to conclude discussions with stakeholders, including labor groups and lessors. The carrier added that it is updating its ATSB application "to include significantly broader, deeper and longer-term cost savings."

"We now believe that UAL Corp. is substantially dependent on ATSB funding," said UBS Warburg analyst Sam Buttrick in a note this week to investors, adding that ATSB demands likely are too strenuous for the company to achieve at this point in time. "It is obvious even to us that bankruptcy at UAL should be increasingly difficult to avoid."

United's stock ended the day's trading at $2.45 per share, a record low. Meanwhile, the company continues to search for Creighton's successor.

Separately, United today said it matched American Airlines' unpublished business fare discounts of 5 percent to 10 percent available through all U.S. travel agencies. Northwest Airlines already matched American's program. United said the discounts also are available when purchasing tickets directly through the airline's Web site and reservations centers, but are not applicable to discounted corporate fares.