12/09/2002: United Airlines Files for Chapter 11 Bankruptcy

DALLAS — On December 9, 2002, UAL Corp., the parent company of United Airlines (UA), filed for Chapter 11 bankruptcy, marking the largest airline bankruptcy ever and one of the largest bankruptcies in US history.

At the time of filing, UA had US$22.8 billion in assets and US$21.2 billion in liabilities. As the world’s second-largest airline, this bankruptcy had significant implications for the company, leading to various cuts in assets and employee numbers but ultimately to one of the greatest comeback stories in commercial aviation.

United Airlines  Boeing 757-222, N591UA, taxiing on September 8, 2001, three days before 9/11. Photo: MacMax, own work, CC BY-SA 3.0
United Airlines Boeing 757-222, N591UA, taxiing on September 8, 2001. Photo: MacMax, own work, CC BY-SA 3.0

Unforeseeable Circumstances

United’s bankruptcy was primarily attributed to a series of events, including the challenging “Summer of Hell” in 2000. During this period, then-CEO James Goodwin faced labor disputes from pilots and mechanics, resulting in shortages, delays, and grounded aircraft. To resolve these disputes, Goodwin implemented a 28% salary increase for pilots, the largest at that time.

Another factor contributing to the bankruptcy was the decline in air travel following the September 11 attacks, which caused a recession in the US and a sharp drop in air travel globally. UA experienced a significant impact, as two of the hijacked flights were from the airline.

Due to the terrorist attacks, the carrier’s domestic passenger revenue dropped 30% per month; overseas traffic to the US decreased from 6 million to 4 million; and worldwide traffic decreased from 1.8 billion to 1.7 billion.

United and other major airlines would later seek loans from the US government, amounting to a total of US$10 billion. The Air Transportation Stabilization Board rejected UA’s request due to concerns about the company’s risky business plan. With the loan denial, UA filed for Chapter 11 bankruptcy on this day, 22 years ago.

United Airlines new A321neo at PHX. Photo: Chris Goulet/Airways
United Airlines’ new A321neo at PHX in December 2023. Photo: Chris Goulet/Airways

United Airlines’ Remarkable Comeback

During the bankruptcy process, UA implemented significant cost-cutting measures. The number of employees was reduced from 100,000 before 9/11 to 62,000 in 2004. Routes to focus cities in Seattle and Miami were cut, and the fleet size decreased from 520 to 466. Additionally, negotiations with staff led to the elimination of the employee pension plan in 2005.

The airline emerged from bankruptcy in 2006 and subsequently entered into merger discussions with Continental Airlines. On May 3, 2010, the two airlines agreed to merge, with UA becoming the surviving brand. This merger would create the world’s largest airline, surpassing Delta Air Lines (DL).

Today, the Chicago-based carrier stands as the third-largest airline in the world in terms of fleet size and travel routes spanning all six inhabited continents. UA is also the largest carrier in the US in terms of offered capacity, the largest operator to Asia and Europe, and the largest US airline to the Middle East, Australasia, Central America, Canada, and beyond.

Featured image: United Airlines Boeing 747-400 in 2001. Photo: Aero Icarus from Zürich, Switzerland, CC BY-SA 2.0, via Wikimedia Commons Sources: The New York Times, The Guardian, The Washington Post, IATA


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Article source: https://airwaysmag.com/12-09-2002-united-chapt-chpt-11/

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