Bankrupt United to start West Coast shuttle service, reapply for loan

Thursday, December 12th 2002, 12:00 am

By: News On 6

HERNDON, Va. (AP) _ Bankrupt United Airlines will set up a shuttle service on the West Coast next year in an effort to regain financial footing as it struggles to negotiate pay cuts and secure a $1.8 billion federal loan guarantee, an official said Thursday.

Glenn Tilton, the airlines' chief executive, told reporters outside a closed meeting with labor leaders that the service would effectively revive Shuttle by United, which was shut down last year because of cost and competition.

The new service, he said, would operate much like Southwest Airlines, with ``point-to-point service'' of low-cost routes without layovers. It's fleet would include Boeing 737s and Airbus 320s, he added.

Tilton said he was negotiating with union leaders to have the subsidiary, carrying a new name, running next year.

Plans for the shuttle service are part of United's effort to come up with a business plan that would inspire government approval for a $1.8 billion federal loan.

The nation's No. 2 airline filed for bankruptcy protection Monday in the largest such filing in aviation history. The Chicago-based United has lost $4 billion in the last two years because of a slumping economy, flawed business strategies and last year's terrorist attacks.

It faced debt payments of $875 million this week, which it could not make.

Tilton said United plans to try again to win $1.8 billion in federal loan guarantees that the government denied it last week.

The airline chief, who was meeting with employees at Dulles International Airport Thursday morning, told reporters that he plans to file a new business plan with the Air Transportation Stabilization Board ``as soon as we have it stitched up.''

The board, an arm of the Treasury Department, last week denied United's request, saying its business plan was not financially sound.

``Well be talking to (the board) about the prospect of their partnership in our exit from bankruptcy,'' which Tilton expects to take about 18 months.

United needs to make steep labor and other cost cuts to emerge from bankruptcy in 2004 as planned, and to keep its $1.5 billion interim financing intact by meeting creditors periodic benchmark.

Tilton said he is talking to union leaders about taking paycuts. He hopes it will be an ``equitable and fair process in deciding who can make what level of contributions to a more competitive cost structure as we go forward.''

United had proposed $5.2 billion in labor cuts by 2008 in its application to the government for the loan guarantee.

United operates about 1,700 flights a day or about 20 percent of all U.S. flights. United's 83,000 employees own 55 percent of the company. The airline has promised to keep flying during bankruptcy as it tries to become profitable again.