Broadcast: July 9, 2004
This is Bob Doughty with the VOA Special English Economics Report.
Bankruptcy is a process that, in some cases, can save a business. Companies that cannot pay their debts may go to bankruptcy court and seek protection from their creditors.
In December of two-thousand-two, United Airlines declared bankruptcy. Since then, the carrier has continued to fly. And it has reorganized. The aim is to come out of bankruptcy and be able to meet financial responsibilities. United is the second-largest airline company in the world.
But last week the government rejected a request for help. The parent company of United had asked the government to guarantee more than a thousand million dollars in loans. That meant the government would share responsibility if United could not repay the loans.
A special committee decided against the aid. The Air Transportation Stabilization Board has three members. They represent the central bank, the Treasury and the Transportation Department. Congress formed this board after the terrorist attacks of September eleventh, two-thousand-one. Air travel decreased after the attacks with hijacked planes.
Congress approved loan guarantees of up to ten-thousand-million dollars to help the transportation industry recover. But the board has used only about fifteen percent of that. And the time limit to request aid has passed.In all, United made three requests for loan guarantees. The first was for one-point-eight thousand million dollars in June of two-thousand-two. The board denied the request in December of that year. It rejected the business plan that United had proposed. But it gave United a second chance.
Then, in June, the board rejected a smaller request. It said credit markets have improved and guarantees were no longer necessary. Air travel has increased worldwide over the past year.Then, at the end of June, the board rejected a third and final request from United.
United says it has cut about thirty-seven percent of its jobs. It says it has cut costs by nearly five-thousand-million dollars. The airline is expected to ask for more pay cuts from its employees. And it is expected to seek at least two-thousand-million dollars in new financing without government guarantees.
This VOA Special English Economics Report was written by Mario Ritter. This is Bob Doughty.