"UAL cuts aid request to $1.1 billion"

Thursday, June 24, 2004

UAL cuts aid request to $1.1 billion
By Dave Carpenter
The Associated Press


CHICAGO -- United Airlines has filed a scaled-down request for
government assistance in a last-ditch try to tap into a loan guarantee
program created to help the airline industry after the 2001 terrorist
attacks.

The No. 2 U.S. carrier filed changes to its application on Tuesday that
include reducing the amount of the federal loan guarantee it seeks to
$1.1 billion from the previous $1.6 billion, a source familiar with the
process said, speaking on condition of anonymity.

United, which says it needs $2 billion in loans in order to pay off its
bankruptcy financing and emerge from Chapter 11, is counting on private
equity to make up the $500 million it sliced from its proposal.

The nation's two largest banks, Citigroup and J.P. Morgan Chase, agreed
last year to provide United's exit loan package if the government would
guarantee much of it. While neither United nor the two banks have
divulged the new terms, the banks' willingness to put more of their own
money at risk was necessary for the airline to submit its reduced
request.

United spokeswoman Jean Medina declined to discuss the changes to the
request yesterday and said the carrier didn't know how long the Air
Transportation Stabilization Board would take to rule on the modified
request.

ATSB spokeswoman Anne Womack Kolton confirmed the new filing but did not
provide details.

The revised application marks the third attempt by the airline to secure
federal assistance dating to December 2002, the month it filed for
bankruptcy.

The ATSB last Thursday rejected United's request for a $1.6 billion loan
guarantee, which was reduced from the $1.8 billion request it made in
2002. But two of three agencies involved with the panel signaled a
willingness to consider revisions.

Unless the board reverses course, United will have to seek investors
willing to sink far more than that into the airline, which hasn't turned
a profit in four years.

Airline credit analyst Philip Baggaley of Standard and Poor's said a
scaled-down request, while potentially addressing the board's concern
about the risk of not being repaid, wouldn't necessarily change its mind
about another key point.

"It is not clear how the revised bid would address one of the grounds on
which the Air Transportation Stabilization Board rejected United's
previous application -- that United could access capital markets on its
own, without government assistance," he said in a research note.
"Indeed, the revised application would seem to confirm the board's
objection."

The new filing comes amid further speculation that Treasury's
representative to the board, Brian Roseboro, an undersecretary at the
department, had resigned. He was one of two board members who voted
against United's request for the loan guarantee last week.

Treasury spokesman Rob Nichols repeated Tuesday that there were no
changes taking place or planned for the ATSB board.

Sen. Peter Fitzgerald, R-Ill., who opposes the United subsidy, released
a letter Tuesday asking the Treasury Department to investigate whether
Roseboro was pressured "to change his vote" on United's application.

Nichols, addressing Fitzgerald's request, defended the integrity of the
process.

"Every judgment we have made on every application has been made on the
merits and the merits alone," Nichols said.

Richard Delmar, counsel in Treasury's Office of Inspector General, said
"we are evaluating" Fitzgerald's request. No decision has been made on
whether to launch such an investigation.


 Do you have an opinion about this story?
Share it with other readers in our CAA Discussion Forums

http://www.californiaaviation.org/dcfp/dcboard.php


*****************************************