CHICAGO (AP) – United Airlines filed the biggest bankruptcy in aviation history yesterday, vowing to keep its jets flying while it tries to straighten out a business that is hemorrhaging as much as $22 million a day.
The world’s No. 2 airline is certain to cut employee wages, reduce flights and eliminate unprofitable routes during a Chapter 11 reorganization that United chief executive Glenn Tilton expects to last about 18 months.
“We’ve made a good decision for United,” Tilton said. “This is a tremendous opportunity for United to transform this company and to emerge stronger than ever.”
The bankruptcy filing is the sixth-largest in U.S. history, covering $22.8 billion in assets.
United operates about 1,700 flights a day, or about 20 percent of all U.S. flights. It has the most extensive worldwide route structure of any airline, but also the industry’s highest costs.
Passengers are not likely to see any immediate effect on flights or frequent-flier miles, according to both United and industry analysts.
But the bankruptcy filing could set in motion a restructuring of the entire industry, with large airlines forced to become more like their low-cost rivals, with fewer and smaller planes and lower wages for its workers.
United has lost $4 billion in the last two years because of the weak economy, flawed business strategies and fallout from the Sept. 11 attacks.
The airline cut service and laid off nearly 20,000 workers after the terrorist attacks, but it has not come close to making up for revenue lost from the drop-off in business travel.
United had hoped to stave off bankruptcy by obtaining a $1.8 billion federal loan guarantee. But the Air Transportation Stabilization Board, created to help the industry recover after Sept. 11, rejected United’s request last week as too risky for taxpayers.
United said it has lined up $1.5 billion in financing from several banks to continue operating in Chapter 11.