CHICAGO – United Airlines said Thursday that it has secured new commitments from banks for up to $3 billion in financing that should enable it to emerge from bankruptcy by early next year at the latest.

The Elk Grove Township, Ill.-based carrier also said its operating profit in July rose to $113 million from $51 million a year ago despite a 46 percent surge in fuel prices, though one-time expenses left it with a net loss of $274 million.

In an e-mail message to employees, chief executive Glenn Tilton said the improved operating earnings and the financing commitments “show just how far we have come at United. Our business plan is viable and financeable and has the full support of the banks. This financing will enable us to exit and to compete effectively in this industry.”

The commitments from the four banks – Citibank, JPMorgan Chase, Deutsche Bank and GE Commercial Finance – were disclosed as the carrier updated its status in a filing with the federal bankruptcy court in Chicago. Citigroup and JPMorgan have put up money to keep United in business while it works its way through bankruptcy proceedings.

Chief financial officer Jake Brace said United is continuing to negotiate the cost and terms of the financing but has fully underwritten offers in hand.

“This validates our business plan and demonstrates that despite the fact that the industry environment has gotten tougher, the United business plan can attract even more all-debt exit financing than it could last winter,” Brace told The Associated Press.

Analyst Mike Mooney of the Boyd Group in Evergreen, Colo., said United remains a worthy investment risk for the banks because of several strengths: its international route network, strong U.S. hub structure, long-term labor deals in place and the shedding of its multibillion-dollar pension obligations.

“It’s a tough business right now, and certainly one can critique the overall success of United’s management team, the amount of time they’ve spent in bankruptcy,” Mooney told The Associated Press. “But United has a beautiful franchise. The banks see the opportunity to step in on that, which puts them in a very preferred position, assuming there is a successful emergence.”

United still hasn’t publicly disclosed its new business plan, and Brace said only that it would be filed in the “not too distant future.”

The carrier attributed its net loss to noncash reorganization expenses. Companies in bankruptcy typically record large noncash expenses shortly before exiting. United ended July with a cash balance of $2.8 billion, up $227 million from June.

“The year-over-year improvement in operating profit despite record fuel prices demonstrates United’s significantly improved competitiveness,” said Brace. “United is well on the way to completing the Chapter 11 reorganization process and emerging as a strong competitor.”

The airline said it again met the requirements set by its debt-in-financing lenders, considered key in obtaining future financing.

United has won major concessions from its unions and reduced other expenses.

“The lion’s share of United’s labor and pension cost savings initiative has been completed,” the carrier said in its filing with the bankruptcy court.

United also told the court that 86.4 percent of its flights were full in July, its highest number ever for the month.

The airline, second in size to leader American Airlines, entered bankruptcy in December 2002 after a disastrous downturn in air travel following the Sept. 11 terrorist attacks.

United’s recovery has been hurt by high jet fuel prices. It spent $955 million for fuel in the second quarter of this year, and its fuel expenses in July rose by $127 million from the year-ago period. Passenger revenue per available seat mile increased 9 percent in July, the airline said.

Besides nailing down the financing, United must resolve the status of some plane leases and is seeking to extend by 60 days, until Nov. 1, management’s exclusive right to file a reorganization plan. Both issues could be discussed at United’s monthly bankruptcy court hearing Friday.


Only subscribers are eligible to post comments. Please subscribe or to participate in the conversation. Here’s why.

Use the form below to reset your password. When you've submitted your account email, we will send an email with a reset code.