CHICAGO – United Airlines has begun reaching out to potential lenders for financing to leave bankruptcy, the company said Friday.
The UAL Corp. (UAL) unit said in an update to the U.S. Bankruptcy Court (search) for the Northern District of Illinois that it has established a framework for presenting its business plan to capital markets, but offered no additional details.
The world's second-largest airline, operating under Chapter 11 protection from creditors for the past two years, also did not identify potential lenders.
United did say consulting firm Bridge Associates LLC (search) had completed its review of the airline's business plan and found it feasible.
The airline plans to boost its international capacity by 15 percent next year and cut domestic capacity by 12 percent. To maintain domestic service after shrinking its mainline fleet, United plans to make greater use of express partners.
But Bridge raised certain conditions that were not publicized. Union groups sought an independent analysis of the company's business plan.
The company's biggest outstanding issue remains its drive to cut costs enough to operate domestically and internationally and satisfy potential investors.
United said earlier this week that it will post a $725 million operating loss in 2005 unless it can wring additional labor savings.
The company says it needs to cut union and non-union labor costs by $725 million a year beyond what was already achieved earlier in bankruptcy.
The carrier has asked Judge Eugene Wedoff for permission to cancel union contracts if voluntary cost-cutting agreements cannot be achieved by mid-January.
The company also wants to terminate union pension plans to save money.
The airline and the leaders of its pilots union represented by the Air Line Pilots Association reached a giveback deal this week worth an estimated $180 million yearly for five years.
The agreement, which includes pay and benefit reductions, must still be considered by the full membership of 6,400 pilots.
According to the agreement, the pilots will not fight the company's plan to scrap its pension plan and replace it with a cheaper one if the court determines removing the benefit is required to exit bankruptcy.
In exchange, pilots will receive $550 million in convertible notes that can be sold to make up some of the shortfall from a less generous pension, the agreement showed.
The company's 8,300 management and salaried non-union workers are also taking pay cuts worth $112 million per year beginning in January.