Chicago, Nov. 30: (Reuters): United Airlines is likely to file for bankruptcy within the next two weeks unless it can soon get a new wage-cut deal from reluctant mechanics and a crucial Federal guarantee of a $ 1.8 billion loan, sources familiar with the matter said on Friday.
Mechanics at United, the No. 2 US airline, on Wednesday rejected $ 700 million in proposed pay cuts over five-and-a-half years. The rejection sharply increased the odds of bankruptcy as a $ 375 million debt payment comes due on Monday.
Shares of United’s parent UAL Corp fell 31 per cent on Friday, and a major credit rating agency downgraded the company’s long-term debt.
“The mechanics’ vote makes bankruptcy virtually inevitable for United and UAL,” wrote Philip Baggaley, an analyst for Standard & Poor’s.
The mechanics’ rejection jeopardises pay-cut agreements achieved by sister unions, including those for pilots and flight attendants. All the unions involved said the givebacks were contingent on every union taking part in the sacrifices.
UAL shares closed off $ 1.12 at $ 2.51 in active trading on the New York Stock Exchange. The stock was the largest percentage loser on the exchange.
Various media reports have listed December 2 as the likely day for a bankruptcy filing. But sources familiar with the matter said that was never the actual deadline to turn to the courts.