United Flies Out of Bankruptcy
Wednesday, February 01, 2006SUSIE GHARIB:United Airlines flew out of Chapter 11 today, after enduring the longest bankruptcy in U.S. airline history. The carrier completed its reorganization and said it will continue the progress it made under court protection. But as Diane Eastabrook reports, the skies ahead are still cloudy for United.
DIANE EASTABROOK, NIGHTLY BUSINESS REPORT CORRESPONDENT: It looked like business as usual today for United Airlines but it wasn`t. The company came out of bankruptcy and admitted it still has its work cut out for it.
PETER MCDONALD, EXEC. V.P & COO, UNITED AIRLINES: We plan to continuously improve our products, our services and become more efficient as we go forward. But today it`s all about thanking our customers and our employees.
EASTABROOK: United is a smaller and more cost-efficient airline than it was a little more than three years ago when it filed for Chapter 11. It has dramatically cut its employee headcount and the number of planes that it flies. It is filling more seats and United flights are making more money for every mile passengers fly. But despite that, experts say United still faces huge obstacles.
DOUGLAS BAIRD, PROFESSOR OF LAW, UNIVERSITY OF CHICAGO: A particular kind of problem is behind United, but not the fundamental problem of running a business profitably on a day-to-day basis. That is something they still need to do.
EASTABROOK: Soaring oil prices are one challenge. United says it can turn a profit if oil prices are in the $50 to $60-a-barrel range. But oil has been trading well above that, prompting analysts to speculate about how United and its competitors will respond.
WILLIAM WARLICK, AIRLINE ANALYST, UNITED AIRLINES: If fuel spikes, inevitably, I think you`ll see United and all of the carriers making some adjustments in their capacity. They`ll be abandoning some unprofitable capacity.
EASTABROOK: United also has a volatile relationship with its labor unions. The carrier abandoned its pensions in bankruptcy and negotiated steep wage cuts with its machinists, pilots, and flight attendants. United`s pilots union said it would keep working with the airline to improve its bottom line. But the union said it might try to reinstate some scheduling and work-rule givebacks it negotiated during bankruptcy.
HERB HUNTER, SPOKESMAN, AIRLINE PILOTS ASSOC.: If the company was smart, from our perspective, they would step up here and try to improve some of these quality of life issues.
EASTABROOK: Another challenge for United is the legacy it now faces. TWA, Continental and U.S. Airways all emerged from Chapter 11 only to go back in again. Experts say the next 18 to 24 months will be crucial for United, if it doesn`t want to follow in the footsteps of those other carriers. Diane Eastabrook, NIGHTLY BUSINESS REPORT, Chicago.
