ATSB members will consider a revised proposal, airline immediately begins rewrite

The Air Transportation Stabilization Board (Board) announced today that it denied the application submitted by United Airlines, Inc. for a $1.6 billion federal guarantee of a $2.0 billion loan under the Air Transportation Safety and System Stabilization Act (Act).

A majority of the Board determined that a guaranteed loan to United is not a necessary part of maintaining a safe, efficient, and viable commercial aviation system in the United States, a requirement of the Act.  The Board notes the positive steps the company has taken since entering bankruptcy in 2002 to lower its costs, strengthen its competitive position, and improve its governance structure.  Moreover, the Board believes that airline credit markets have been improving since late 2001 and 2002, the period during which the Board granted most of its approvals for loan guarantees, increasing the likelihood of United succeeding without a loan guarantee.  Given these circumstances, a majority of the Board believes that the likelihood of United succeeding without a loan guarantee is sufficiently high so as to make a loan guarantee unnecessary.  Finally, the Board considered proposals made by United in a series of meetings this week.  A majority of the Board believes that these revisions do not change their view of the necessity of a federal loan guarantee.

Considering all of the foregoing factors, Chairman Edward Gramlich and Under Secretary of Treasury for Domestic Finance Brian Roseboro voted to deny the application.  Under Secretary of Transportation for Policy Jeffrey Shane voted to defer the decision for one week pending further Board discussions with United regarding its most recent proposals.

The Board conducted its review pursuant to the standards set out by the Act and by the implementing regulations promulgated by the Office of Management and Budget.  The Board considered all relevant information, including information obtained during numerous meetings between United, Board staff, and agency representatives during 2003 and 2004.

The Board's letter to United is available on the third URL link below. United Airlines' issued a statement following the announcement of the decision:
 
"We are perplexed by the announcement made by the Air Transportation Stabilization Board (ATSB) this afternoon. We have reason to believe we are in the midst of a process with the ATSB to make our application acceptable and that a decision was premature."

"We do not believe that the Board was made fully aware of the important modifications United was willing to bring to the table. We are respectfully petitioning the ATSB for reconsideration of our pending loan application."

FMI: www.united.com, http://www.ustreas.gov/offices/domestic-finance/atsb/, http://www.ustreas.gov/press/releases/reports/atsbltr_js1733.pdf