United to resurrect shuttles in West

Leigh Strope

Thursday, Dec. 12, 2002 | 11:15 a.m.

HERNDON, Va. -- Bankrupt United Airlines will set up a shuttle service on the West Coast next year in an effort to regain financial footing as it struggles to negotiate pay cuts and secure a $1.8 billion federal loan guarantee, the chief executive said today.

United CEO Glenn Tilton told reporters outside a closed meeting with labor leaders that the service would effectively revive Shuttle by United, which was shut down last year because of cost and competition.

The new service, he said, would operate much like Southwest Airlines, with "point-to-point service" on low-cost routes without layovers. Its fleet would include Boeing 737s and Airbus 320s, he added.

Tilton said he was negotiating with union leaders to have the subsidiary, carrying a new name, running next year.

Plans for the shuttle service are part of United's effort to come up with a business plan that would inspire government approval for a $1.8 billion federal loan.

The nation's No. 2 airline filed for bankruptcy protection Monday in the largest such filing in aviation history. Chicago-based United has lost $4 billion in the last two years because of a slumping economy, flawed business strategies and last year's terrorist attacks.

It faced debt payments of $875 million this week, which it could not make.

Tilton said United plans to try again to win $1.8 billion in federal loan guarantees that the government denied it last week.

The airline chief, who was meeting with employees at Dulles International Airport this morning, told reporters that he plans to file a new business plan with the Air Transportation Stabilization Board "as soon as we have it stitched up."

The board, an arm of the Treasury Department, last week denied United's request, saying its business plan was not financially sound.

"Well be talking to (the board) about the prospect of their partnership in our exit from bankruptcy," which Tilton expects to take about 18 months.

United needs to make steep labor and other cost cuts to emerge from bankruptcy in 2004 as planned, and to keep its $1.5 billion interim financing intact.

Tilton said he is talking to union leaders about taking pay cuts. He hopes it will be an "equitable and fair process in deciding who can make what level of contributions to a more competitive cost structure as we go forward."

United had proposed $5.2 billion in labor cuts by 2008 in its application to the government for the loan guarantee.

United operates about 1,700 flights a day or about 20 percent of all U.S. flights. United's 83,000 employees own 55 percent of the company. The airline has promised to keep flying during bankruptcy as it tries to become profitable again.

A spokesman for United Airlines said today that it would be premature to discuss details of the airline's revamped shuttle plan and whether Las Vegas would be part of it.

But a source with knowledge of the plan said Las Vegas would be included, particularly because Las Vegas is located between Los Angeles and Denver, two United hub cities.

The Sept. 11 terrorist attack was a catalyst for United's discontinuation of the shuttle program in October 2001. Following the attacks, United cut 30 percent of its Las Vegas flights, including 11 daily and one weekly operation. Some flights that were retained used larger aircraft to minimize the loss of capacity into the market.

United folded the Boeing 737 jet fleet from the Shuttle program into its mainline operation.

Prior to the attacks, United flew 468 daily Shuttle flights between 33 Western locations.

From McCarran International Airport, United had 11 daily round-trip Shuttle by United flights to and from Denver, 10 to and from San Francisco and nine to and from Los Angeles.

The Las Vegas Sun

contributed to this report.