CHICAGO (Reuters) - Glenn Tilton, chief executive of UAL Corp.'s (NYSE:UAL - news) United Airlines, on Friday called bankruptcy "a more likely outcome" after the government's decision this week not to bail out the No. 2 U.S. carrier, and he hinted that tough talks with unions were in store.
The UAL board of directors is scheduled to meet on Saturday. It was expected that a bankruptcy filing, which requires board approval, would come up for a vote.
A spokesman for United, based in Elk Grove Village, Illinois, declined to comment on the board's agenda.
Shares of parent UAL fell again on Friday after shedding two-thirds of their value on Thursday, as a likely weekend bankruptcy filing loomed.
The stock hit a new low of 79 cents a share on the New York Stock Exchange (news - web sites) before rebounding slightly. Early Friday afternoon it was off 18 cents at 82 cents. The stock could be delisted if it continues to trade below the NYSE's minimum requirement of $1 per share, the exchange said on Thursday.
Tilton, who came on board the struggling airline just three months ago from the oil industry, said United has examined every aspect of a filing for bankruptcy protection.
"We have been preparing for a Chapter 11 filing for months, and we are ready if we decide that's the best course for the company," Tilton said on a telephone hotline message to employees, updated on Friday.
In bankruptcy, he warned, deeper cost savings would be needed at the No. 2 U.S. airline.
"We will need more cost savings," Tilton said. "Work rules will have to be on the table. We have to take this opportunity to create a durable, stable cost structure.... Chapter 11 is a difficult process, but we can and will be successful if we file."
The federal Air Transportation Stabilization Board on Wednesday rejected United's application for a $1.8 billion loan guarantee that the company said was crucial for avoiding bankruptcy.
"Obviously with what was essentially a 'no' from the ATSB, Chapter 11 becomes a more likely outcome because it allows us to restructure and to continue to serve our customers while we do it," Tilton said.
He said that competitors would be homing in on United and that employees must be prepared to be "better, more efficient, more effective in everything we do."
United is 55 percent employee owned, and about 80 percent of its workers belong to unions.
LABOR STILL CONFERRING
Union leaders, meanwhile, were mounting a last-ditch effort to avoid a court restructuring. The master executive council of the United branch of the Air Line Pilots Association (news - web sites) has been meeting in Chicago.
Thomas Buffenbarger, president of the powerful International Association of Machinists, told Reuters in an interview on Friday his union still prefers to avoid the court, and he blamed the government for rejecting the loan guarantee.
"Our preference is not to go to bankruptcy, but we realize they don't have a whole lot of time," he said. "All day yesterday, the company was scrambling."
Rank-and-file mechanics represented by the IAM last week rejected their portion of the wage cuts supporting the loan guarantee application, $700 million over 5-1/2 years. Tilton earlier this week called the mechanics' vote a blow to the airline's effort to get the federal aid.
Buffenbarger said the workers would have ratified the cuts in a new vote on nearly the same package that had been scheduled for Thursday evening.
"Some of the membership, understandably so, is extremely angry at how this has turned out," he said. The IAM canceled the revote after the government rejected United's bid for a loan guarantee.
Whether the IAM will lose jobs in the event of bankruptcy remains to be seen, Buffenbarger said, adding he was unsure how well Tilton could guide the company through the complicated bankruptcy process.
"He's pretty new at the helm," Buffenbarger said. "I don't know how he'll do. We give him good grades for his efforts."
NO PAY CUTS NOW
Wage cuts agreed by leaders of five unions, amounting to $5.2 billion in concessions over 5-1/2 years, will not take effect as scheduled, Tilton said, because they were conditioned on United's receiving the government loan guarantee.
As a backup plan, United is now nearly finished arranging $1.5 billion in financing needed to operate in bankruptcy. Of that amount, sources familiar with the situation told Reuters on Thursday, slightly more than half will be made available immediately upon approval from a bankruptcy judge.