Sat, Jun 19, 2004
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."
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