United finally emerges from Chapter 11
03.02.06
United Airlines finally left Chapter 11 bankruptcy protection yesterday. The US carrier's painful restructuring began in 2002 and lasted a record 1150 days. It leaves the creditor protection process 'leaner and more cost-efficient', according to industry observers.
Glenn Tilton, CEO of United and parent UAL Corp, said in a statement: 'We have achieved a great deal in our restructuring to reposition this company and build upon our assets, an unrivaled global network and our dedicated employees.' But in an apparent acknowledgment that United has not posted a profit since 2000, he added: 'We can be better.'
Citing higher fuel costs as a problem, Tilton said the airline would return to profitability by continuing to 'contain costs, apply sound revenue management and deliver consistent service to our customers'. United reported a net loss last year of $21 billion. But officials of parent company UAL said the airline 'outperformed the industry in revenue improvement.'
Passengers were not impacted since the airline continued to be operational but today it is a changed company. United has about 30% fewer employees (58,000), 20% fewer aircraft (460) and 20% lower operating costs (7.5 cents per seat per mile), excluding fuel, than it did when the bankruptcy began.
Labour costs are down by more than $3 billion annually after two steep pay cuts and the elimination of defined-benefit pensions. Dozens of daily domestic flights have been eliminated. On the other hand, international routes are up. On-time arrivals are also up.
The big cloud on the horizon for United and other carriers remains near-record fuel prices, which are likely to extend its money-losing streak by at least another year. Tilton said, however, that until the US airline industry 'sorts itself out,' an immediate return to profitability should not be the primary gauge of whether United succeeded in Chapter 11 bankruptcy.
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