United Airlines and Its Parent Corp UAL Corporation File For Chapter 11 Reorganization


United Airlines and Its Parent Corp UAL Corporation
File For Chapter 11 Reorganization  

December 9, 2002, UAL Corp. (NYSE: UAL), the parent company of United Airlines, today announced it and certain of its U.S. subsidiaries have filed for protection under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Northern District of Illinois, Eastern Division in Chicago. The Chapter 11 process will facilitate UAL’s restructuring which is designed to restore the company to long-term financial health while operating in the normal course of business.

UAL said that during its Chapter 11 case, it will maintain its ability to continue its global operations and continue its long-standing commitment to its customers, safety and reliability. Chapter 11 permits a company to continue operations in the normal course while it develops a plan of reorganization to address its existing debt, capital and cost structures. Glenn F. Tilton, chairman, president and chief executive officer of UAL, said, “United Airlines will continue to provide customers with the same experience and level of service they have come to expect. We stand by our commitment to provide customers with convenient schedules, quality onboard services and the most extensive route network in the U.S. and abroad. Most importantly, throughout this process, customer safety will continue to be our number one priority.

We have a solid record as a safe and reliable airline, and we intend to maintain and build upon that record.” UAL stressed that it is business as usual and that current and future tickets on United flights will be honored, and United will continue to participate fully in the Star Alliance. Mileage Plus participants continue to be able to accrue and redeem mileage on United and all partner airlines. The company said that its other code-share agreements will not be affected by the filing. Red Carpet Clubs remain open and ready to serve customers.

To ensure the smooth operation of the airline, the company said that it has requested relief from the bankruptcy court allowing it to, among other things, continue customer programs including Mileage Plus and Red Carpet Clubs, continue making regular and timely payments to fuel vendors, hotels and other services, obtain debtor-in-possession financing, assume clearinghouse and interline contracts and pay employee salaries, wages and benefits without interruption.

UAL reported that in conjunction with its filing, it has arranged commitments for $1.5 billion in debtor-in-possession (DIP) financing. The DIP financing is structured as a $300 million facility from Bank One and a $1.2 billion facility from a group that is led by J.P. Morgan Chase and Citibank, and includes CIT Group and Bank One. Access to $700 million of the $1.2 billion facility is subject to certain terms of the facility. Such terms require that the company achieve performance milestones under its business plan, which include substantial cost savings in the near term. In addition to approximately $800 million in unrestricted cash-on-hand, the DIP financing will provide adequate liquidity to meet the anticipated needs of UAL and all of its operating units to continue normal operations throughout the Chapter 11 process.
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