After US Airways' bankruptcy filing, many wondering if United will be next; stock falls again

Tuesday, August 13th 2002, 12:00 am
By: News On 6

CHICAGO (AP) _ United Airlines' fast-descending stock plunged an additional 25 percent to a 20-year low Tuesday, pressured by rival American Airlines' newly announced overhaul and a rare ``sell'' order by a top Wall Street analyst.

A day after falling 28 percent Monday in response to US Airways' bankruptcy filing, shares in UAL Corp. dropped an additional 95 cents to $2.85 in morning trading on the New York Stock Exchange. That is UAL's lowest level, adjusting for stock splits, since 1982.

American, which surpassed United last year as the biggest U.S. airline, slashed capacity, retired 74 planes and announced other cost-oriented steps in a restructuring it said other carriers will likely have to emulate to survive.

Respected industry analyst Sam Buttrick of UBS Warburg, while bullish on other airline stocks, called bankruptcy ``increasingly difficult to avoid'' for UAL.

He said company appears dependent on government-backed funding _ a requested $1.8 billion federal loan guarantee _ that he suggested may not be forthcoming because of stiff cost-cutting requirements by the Air Transport Stabilization Board.

Buttrick said that ``in the increasingly likely event of a bankruptcy within the next six months (we) would expect the stock to migrate irregularly towards zero.''

United spokesman Joe Hopkins said the airline had no comment on either American's new plan or the analyst's downgrade.

United had implemented a financial recovery plan to stem losses from the Sept. 11 terrorist attacks, but the nation's No. 2 carrier faces several obstacles along its road to recovery, including high labor costs and losses of more than $1 million a day.

Even before Monday and Tuesday's drop in stock prices, shares of United parent UAL Corp. had already had lost more than half their value since the start of July. They traded at $35 a year ago.

United officials have declined to discuss the prospects of a Chapter 11 filing. But interim CEO Jack Creighton told United employees Sunday that the government appears likely to reject the application for the $1.8 billion loan guarantee unless there is more progress in cutting costs.

United's pilots have agreed to conditional wage cuts as part of the financial recovery plan, but mechanics and flight attendants have not. The airline says the agreements are crucial to cutting costs.

Even the loan guarantee would not ensure that United can avoid bankruptcy, not after losing a record $2.1 billion last year and an additional $851 million during the first six months of 2002.

The situation isn't entirely bleak for United. It has more than $2 billion in cash reserves, more aircraft than US Airways and a superior route system.