"DIA lays out scenario if United should liquidate"

Saturday, October 16, 2004

DIA lays out scenario if United should liquidate
By Jeffrey Leib and Kelly Yamanouchi 
The Denver (CO) Post

 
In the event of a worst-case liquidation of United Airlines, Denver
International Airport initially could lose up to 10 million passenger
boardings, according to information released by the airport. 

DIA prepared the so-called "liquidation scenario" as part of a 396-page
disclosure document for a $150 million bond sale the airport expects to make
in the coming week.

United and its affiliates account for about 60 percent of DIA's passenger
traffic, and if Denver's largest airline were to go out of business, other
carriers would rapidly pick up the portion of United's business that serves
passengers beginning or ending trips in Denver, the bond document said.

But the extent to which other airlines could absorb United's connecting
traffic - passengers who merely switch flights at DIA - would depend on
Frontier Airlines' ability to enlarge its Denver hub and the expansion of
other airlines that serve DIA, according to the airport's document.
  
"It was generally assumed that the process of developing a connecting hub
would take a number of years to be fully complete following United's
liquidation and would be achieved in five years," the document said.

In recent months, DIA has been reporting record levels of passenger traffic.

The airport is on target to handle more than 40 million passengers this
year.

United is one of the area's largest employers, with about 6,000 workers.

"We want United to succeed. They are tremendous partners here in our city
and a major hub for us," Denver City Councilman Michael Hancock said Friday.

But if the airline does not survive, other carriers are prepared to capture
market share that United would lose, said Hancock, who last week was named
by Denver Mayor John Hickenlooper as a co-chairman of a 31-member committee
that will examine a possible new management structure for DIA.

United filed for Chapter 11 bankruptcy in December 2002 and is trying to
reorganize and emerge from bankruptcy status.

The airline has been warring with its unions over the company's proposal to
terminate pension plans as a cost-cutting move.

On Friday, a lawyer for United told a bankruptcy hearing in Chicago the
airline "still believes that termination and replacement of its pension
plans will be likely."

He added that "given the urgency of United's situation and the stark
financial reality in the entire industry, United believes that it likely
will have no choice but to seek further nonpension labor-related savings."

In a quick response to the airline's comments, the pilots union at United
said that while "we fully understand the financial challenges facing the
company," pilots "will not participate in any reorganization" that does not
recognize they "have shouldered a disproportionate share of employee
sacrifice in this bankruptcy and would bear the vast majority of financial
losses in any pension termination."

The DIA bond document released Friday also examined a possible scenario in
which United would remain in business but with a significantly reduced
operation at DIA.

This month, United announced a planned reduction in its mainline domestic
flying and the likely replacement of some routes with service using small
regional jets operated by the carrier's United Express affiliates.

About $50 million of the bonds that will be sold this week are earmarked for
construction of a new regional jet terminal for United on the east end of
DIA's B concourse.

Attached Photo:

A United Air Lines jet taxis at Denver International Airport in this 2002
photo.

OL17UNITED.jpg