Sagging under a burden of debt, cash-strapped United Airlines filed for bankruptcy Monday morning in the world's largest Chapter 11 filing ever for the airline industry.
However, United said they were far from flying out of control and the firm stressed in a statement it will be "business as usual" for customers.
"We're in control of United's destiny," United CEO Glenn Tilton said Monday. "We've made a good decision for United. It is in fact Chapter 1. ... This is a tremendous opportunity for United to transform this company and to emerge stronger than ever."
The No. 2 U.S. carrier, which has one of the broadest networks in the world, will continue to fly worldwide as it attempts to reorganize under protection from the U.S. Bankruptcy Court in the Northern District of Illinois.
But big changes are in store for employees, suppliers and others, said Tilton.
Tilton said he would consider selling some of the airline's assets in bankruptcy if they don't fit and someone else is willing to pay a "superior" price. The airline will shrink in the future, but he could not yet predict how much.
In court, the airline said its cash "burn," or daily losses, during the relatively slow travel months of December and January would be two to three times larger than its previously declared losses of $7 million to $8 million a day.
United, which has about 83,000 employees, had two of its Boeing jets commandeered in the devastating attacks on New York and Washington on Sept. 11, 2001.
Since then it has posted nearly $4 billion in losses, with no end in sight to the red ink.
Standard & Poor's Ratings Service downgraded United's senior unsecured debt to its lowest rating Monday and investment bank Merrill Lynch dropped coverage of the company.
Judge Eugene Wedoff, chief of the bankruptcy court in Chicago, is presiding over the huge bankruptcy case, which the airline said it hopes to complete within 18 months.
The entire U.S. airline industry has been reeling from a slump in business travel and the Sept. 11 attacks, posting losses last year of about $10 billion and on track for at least $7 billion in losses this year.
Shares of parent company UAL Corp. (UAL) tumbled as much as 15 percent from Friday's close on the New York Stock Exchange, but pared losses to trade unchanged at 93 cents by market close on Monday. The exchange is still reviewing whether to delist the stock.
At a court hearing Monday, attorney James Sprayregen said United expects to burn through $20 million to $22 million a day in December and $10 million to $15 million a day in January, compared with its previous daily burn of $7 million to $8 million.
The airline now has about $800 million in unrestricted cash on hand and $600 million in restricted cash, Sprayregen said.
The court filing had been widely expected and analysts generally predict a successful although lengthy court process.
For United, which has a history of labor troubles and some of the highest wage costs in the industry, the downturn has also proved too difficult to navigate. The U.S. government last week rejected the airline's bid for federal loan guarantees, which had been its last hope for securing fresh capital.
Another big U.S. airline, Arlington, Virginia-based US Airways Group, filed for bankruptcy in August, and several smaller carriers have shut down altogether.
"The odds clearly favor a reorganization, but that is by no means a foregone conclusion," said Gary Chase, airline analyst at Lehman Brothers. "United and its employees and suppliers have to quickly address the company's heavy cash burn in order to ensure a successful reorganization."
Tilton said to get out of bankruptcy, the airline may reapply to the government for loan guarantees. "It's a very good possibility," he said. "I think that's what they intimated in their response. I think the new business plan will be far more appealing to them upon exit than what we were able to put together as a stabilization."
In a statement, the International Association of Machinists, representing about 37,500 workers, said it foresees sacrifices for workers but the union is energized about its role in the bankruptcy.
"Though bankruptcy may be new for our United Airlines members, the IAM has resources and experience in this area. We do not intend to be passive participants in United's bankruptcy. Actually, we are primed to play an active role."
The Air Line Pilots Association also said any successful restructuring must involve the pilots' union.
"United Airlines' Chapter 11 bankruptcy filing is one of the most difficult and disappointing developments in our proud history and one that we have worked extremely hard over the past 12 months to avoid," said Captain Paul Whiteford, the head of the airline's pilots branch.
Leaders of United's unions had agreed to a total of $5.2 billion in wage cuts over 5-½ years, but rank-and-file mechanics rejected their $700 million portion the night before Thanksgiving, dealing the bailout plan a blow.
Tilton said he still believes the $9 billion outlined by former CEO Jack Creighton was a reasonable level.
United is 55 percent employee-owned, and the pilots and machinists each have a seat on the company's board after a 1994 employee stock ownership plan was put in place. A simple majority vote from the board was required to approve a bankruptcy filing. Bankruptcy usually leaves a company's common stock worthless.
"The natural tendency in situations like this is to waste energy placing the blame," Chase said. "Unfortunately, that's the most unproductive thing that United and its employees and creditors can do at this time."
Included in the bankruptcy filing are UAL Corp., United Airlines Inc. and 26 other direct and indirect subsidiaries.
United confirmed it arranged with a group of banks for $1.5 billion in financing to see it through bankruptcy. At the final hour, GE Capital pulled out of the group of lenders and was replaced by CIT Group.
The other three lenders are JP Morgan Chase, Citibank and Bank One.
Banks and others are willing to lend United the money in bankruptcy because these credit lines get paid back first.
Reuters and The Associated Press contributed to this report.