United Airlines (NYSE:UAL) announced today that it has filed an updated business plan with the Air Transportation Stabilization Board (ATSB). The plan was submitted to the ATSB last night.
On June 24, 2002, United Airlines filed an application for federal loan guarantees of $1.8 billion. The company is seeking $2 billion in financing to meet its current liquidity needs.
Key elements of the update that go beyond the original filing include:
- Labor cost reductions of $5.8 billion over the next five and a half years;
- The participation of all of the company`s employee groups;
- Specific non-labor profit improvements of $1.4 billion annually, and a process for developing an additional $400 million in savings;
- An additional 12% reduction in capacity; and
- Further reduction in 2003 through 2005 capital spending of $1.2 billion.
The company is also working with its vendors, lessors and lenders on additional measures to improve its financial position.
In a letter accompanying the submission, United Airlines Executive Vice President and Chief Financial Officer Jake Brace noted that the updated business plan includes “(a)n agreement by the United union coalition to participate on a labor cost reduction framework that yields $5.8 billion in cost savings over the next five and a half years. This agreement with the union coalition represents a significant breakthrough in United’s efforts to reduce our cost structure and will allow United to compete effectively with our lower-cost competitors. We have moved beyond the coalition phase of this negotiation and are negotiating bilateral contract amendments with the various unions.”
Brace told the ATSB that “the company continues to work tirelessly to find other means of enhancing revenue and lowering costs.”