United Inches Closer To Loan Guarantee
Clearing a critical hurdle on its way toward federal loan guarantee approval, United Airlines last night announced tentative agreements with the International Association of Machinists and Aerospace Workers District 141 and 141M. More than 37,500 mechanics, ramp employees and customer service workers became the last major employee group at the airline to tentatively agree to an overarching labor restructuring that will save $5.8 billion over five-and-half years.
"The fact that all six union groups have reached tentative agreements is evidence of a new attitude and commitment, which can translate into a competitive advantage for United Airlines," said CEO Glenn Tilton.
The rank-and-file still must ratify the contract. Voting is scheduled for Nov. 27.
Assuming all other tentative agreements also are approved and labor unions and management stay on the same page of United's financial recovery plan, the company in the coming weeks will try to persuade the Air Transportation Stabilization Board to back $1.8 billion worth of a $2 billion loan.
That loan guarantee is essential for United to avoid a bankruptcy filing early next month. It faces a $375 million debt payment due Dec. 2 and continues to burn through at least $7 million per day. Despite the progress in cutting labor costs, there is plenty of debate on whether United deserves a loan. ATSB has not indicated if or when it will approve the carrier's application. Even if United secures federal support, the airline still could opt for a Chapter 11 filing.
Meanwhile, ATSB yesterday confirmed it closed on a $168 million loan on behalf of American Trans Air, backed by a $148.5 million federal guarantee. ATSB conditionally approved ATA's request in September.
Other carriers that received conditional loan guarantee approval from ATSB include Aloha Airlines, Frontier Airlines and US Airways. America West Airlines earlier this year was granted final approval on its loan guarantee request. Those denied include Spirit Airlines and now-defunct National and Vanguard airlines.