United Airlines and American Trans Air are talking with federal officials about requirements for a government guaranteed loan, industry and government officials said this week.
Although both airlines declined to comment on their discussions, officials of the Air Transportation Stabilization Board said they have held preliminary talks with both airlines about the requirements to receive a guaranteed loan.
Only America West Airlines has received a government-secured loan under provisions of the $15 billion airline bailout, approved after the terrorist attacks of Sept. 11. Two other airlines, Vanguard and Spirit, have filed applications.
Tempe, Ariz.-based America West received the government guarantee only after it agreed to give the government a 10-year option to buy one-third of its publicly traded stock at less than $4 a share. In exchange, it received a guaranteed loan of $429 million.
Trading an ownership stake in the airline in exchange for a loan is anathema to United and other large carriers. United’s and ATA’s talks with the stabilization board have revolved around what other kinds of requirements could be imposed if the airlines sought a loan.
A United spokeswoman said Thursday that the Elk Grove Township-based airline “has not decided whether it will apply for a loan.” ATA of Indianapolis also has not made a decision on whether to apply for a loan, a spokeswoman said.
Compounding United’s problem, however, is that negotiations with its unions about wage concessions, which almost certainly would be demanded by the board to bolster its finances, are in limbo.
The airline had hoped to settle all outstanding labor negotiations before approaching its unions for givebacks, but the carrier has not settled on a contract with its 30,000 ramp and customer contact workers. United’s chairman and chief executive, Jack Creighton, has said that concessions will be needed to restore profitability.
Wall Street estimates United will report a first-quarter loss of more than $800 million on April 19, according to Sam Buttrick, airline analyst for UBS Warburg.
Last year, United lost a record $2.1 billion, and analysts say the carrier could lose $1.7 billion this year.
Meanwhile, analysts also are projecting that ATA will lose $38 million in the first quarter.
Although Buttrick estimates the industry will lose a collective $2 billion in the first quarter, he said Thursday that many carriers are recovering faster than expected.
Part of that is due to the $4 billion in grants that have been distributed by the government under the bailout, including $644.1 million to United and $43.9 million to ATA.
In addition, the industry is expected to receive $2 billion in tax refunds for the losses it suffered last year under a separate economic development program. United obtained a $464 million refund.
United and other major carriers also are hoping to persuade the loan board to allow them to apply for lines of credit, rather than loans.
A line of credit, which allows a company to borrow money as conditions warrant, offers some advantages for the airlines, analysts said, namely keeping more debt off their balance sheets.
So far, the government has not agreed to their request. Betsy Holahan, a spokeswoman for the stabilization board, said, “Lines of credit are not loans.”
