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e-business: Cash crisis catches up with United Airlines.

Crisis-hit United Airlines yesterday sought to reassure passengers and staff after filing for bankruptcy court protection in the US.

The group said flights in and out of London Heathrow would continue as normal and its 2,000 UK workers would be paid to the 'usual timelines'.

But cabin crew and check-in staff face an uncertain Christmas as the airline looks to cut costs and save cash in the coming months. United is on track to lose an industry-record pounds 1.6 billion this year after a series of setbacks.

Flawed strategy, the slumping US economy and the impact of the September 11 terror attacks have all left the business reeling.

It applied for Chapter 11 bankruptcy protection after finding itself unable to meet pounds 640 million due this week.

Chapter 11 frees a company from the threat of creditors' lawsuits while it reorganises its finances over an agreed time.

But a bankruptcy court judge is almost certain to order wage and job cuts and could dissolve the employee share ownership plan. United, with about 83,000 employees, had two of its Boeing jets commandeered in the devastating attacks on New York and Washington on September 11, 2001. Since then it has posted nearly pounds 2.5 billion in losses, with no end in sight to the red ink.

Another big US airline, Arlington, Virginia-based US Airways Group, filed for bankruptcy in August, and several smaller carriers have shut down altogether.

For United, which has a history of labour troubles and some of the highest wage costs in the industry, the downturn has also proved too difficult to navigate. The US government last week rejected the airline's bid for federal loan guarantees, which had been its last hope for securing fresh capital.

United is 55 per cent employee-owned.

European planemaker Airbus said United's move would have no immediate impact on the company as its next deliveries were not until 2004.

'We delivered the last aircraft, which was due in 2002, in October and we have no more aircraft for United scheduled until the beginning of 2004,' said Airbus spokeswoman Barbara Kracht.

United flies 152 Airbus aircraft, more than a quarter of its fleet, the world's third largest.

Lufthansa chairman Juergen Weber has confirmed that the German national airline is considering giving risk-free financial assistance to United.

Mr Weber said there have been examples of airlines who have successfully restructured under Chapter 11.
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Title Annotation:Business
Publication:The Birmingham Post (England)
Geographic Code:1USA
Date:Dec 10, 2002
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