United Airlines' two-year effort to secure a critical US government loan guarantee was shot down on Monday when a federal board unanimously affirmed its decision to reject the application and said it would not accept any further submissions.

The decision by the Airline Transportation Stabilisation Board, the federal body set up to aid struggling airlines, came in spite of a range of last-minute concessions from United and the intervention of Dennis Hastert, the influential Speaker of the House, who had lobbied to keep the application alive.

However, the ATSB resisted this high-profile political pressure. A letter sent on Monday by Michael Kestenbaum, executive director of the ATSB, said the members had considered United's concessions, but concluded they did not "alter in a material manner the rationales underlying the Board's June 17th decision".

The concessions, submitted last week, included reducing its application for aid from $1.6bn to $1.1bn, agreeing further cost-cutting and a pledge to seek $500m private equity investment.

On June 17, two board members concluded that United did not meet two of the three key criteria of the loan guarantee act, arguing that a loan guarantee was not a necessary part of maintaining a safe, efficient and viable aviation system, as required by the act, and that United had access to credit markets. This conclusion was endorsed on Monday by Jeff Shane, transportation under-secretary, who had earlier voted to defer his decision.

United sought to present the rejection in a positive light saying it was "gratified by the ATSB's public recognition of our progress and [is] already moving forward to secure the exit financing we need to take United out of bankruptcy". However, the decision is a blow to the management team and leaves the airline dependent on the capital markets and private equity for cash to fund an exit from bankruptcy.

Negotiations to secure alternative funding will take months and lenders are expected to demand further cost cuts.

One private equity executive warned that United might have to reduce its costs aggressively. "United cannot have a cost structure that is 50 per cent higher than the low cost carriers. To be in the right ball park they need to be within 20 per cent of America West or Southwest's cost structure," the executive said.

United has made progress over the past 18 months, taking out more than $5bn of annual costs, yet its costs remain among the sector's highest. It is also still lossmaking, reporting a net loss in May of $93m, after $58m of shake-up costs. The loss came in spite of record passenger load factors for May of 80.1 per cent.

In a recent bankruptcy filing, one adviser to United warned: "Rejection by the ATSB will send a negative message to the marketplace regarding United's business plan and ongoing viability and may further constrain United's already limited access to capital."