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United Might Be Next for Bankruptcy

Aired August 12, 2002 - 14:01   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

CAROL LIN, CNN ANCHOR: The nation's airlines made no secret of their financial distress in the wake of September 11, and now, as the first anniversary approaches, one airline says it cannot go on without serious help. US Airways has filed for bankruptcy protection, citing losses of almost $2 billion in 2001, and no upturn in sight.
The Virginia-based carrier operates almost 4,000 flights every day, and vows no cutbacks during reorganization. It maintains hubs in Charlotte, Pittsburgh, and Philadelphia, and has a big presence at Reagan National -- Reagan Washington Natural -- National, which is part of its problem. That airport did not fully reopen for months after September 11.

CNN's Patty Davis is live from Washington with the latest on that -- Patty.

PATTY DAVIS, CNN CORRESPONDENT: US Airways flights are operating without a problem today, no cancellations related to the bankruptcy, according to the company.

Now, US Airways says it is a victim of the recession, as well as September 11, and the fact, as you said, that one of those big hubs, Reagan National Airport here in Washington, D.C., was closed for weeks after the terror attacks. US Airways says that there may be some layoffs of workers, however. Now the question turns to which airline could be next.

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DARRYL JENKINS, DIRECTOR, AVIATION INSTITUTE: Outside of US Airways right now, it is United Airlines. They have a very big debt payment due at the end of the year. If they make that payment, then they become dangerously low on cash, and at that time, they could possibly file.

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DAVIS: In addition to that big debt payment due at the end of the year, United has high labor costs. It recently struck a deal with pilots and other workers for concessions.

Now, the airline industry as a whole lost nearly $8 billion last year. United alone had 2 billion of that. The industry is bleeding red ink for many of the same reasons that forced US Airways to go into bankruptcy. The slow economy is making people think twice about traveling. They're looking for lower fares when they do travel. These airlines are still hurting from September 11. Now, the bigger airlines have highly-paid workers and all that, Carol, bites into the bottom line.

LIN: So Patty, is there anything that passengers need to worry about? I mean, passengers who have already bought tickets.

DAVIS: As far as US Airways is concerned, no. The company says that it is honoring all tickets, all flights are flying, in fact, in the bankruptcy filing in court today, the company said that yesterday, when it actually did declare bankruptcy, it had 98 percent of its flights in the air. So all flights will continue, according to the airline. So don't worry if you hold tickets -- Carol.

LIN: Good news for consumers. Thanks so much, Patty Davis.

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