The government rejected United’s application for a government-backed loan. (They were seeking $2 billion with $1.8 billion guaranteed by the government.) The vote was 2-1 against with the Treasury and Fed representatives voting against and the Transportation Department voting for.
As a result of the government’s rejection, the IAM (machinists’ union) cancelled their vote on contract concessions.
Without those concessions and without the government loan, United has said it would file for bankruptcy.
United has about $1.6 billion cash on hand and its net assets are positive, but it is losing about $7 million per day and is on track to lose $2 billion this year.
They are in the midst of a ten-day grace period (which runs out December 12th) on a $350 million debt payment.
United is likely to file for Chapter 11 bankruptcy before the 12th in order not to make that big payment. They want as much operating cash going into a bankruptcy filing as possible.
United has also been talking to several banking institutions about $2 billion in “debtor-in-possession” financing to continue operations during Chapter 11 bankruptcy.
Odds on that frequent flyer miles are safe and schedules will operate as planned in the short run.
In the long run, United will do major restructuring which might include asset sales and route cutbacks.
Heck, I’m flying them this evening and am not worried. Now my Monday morning flight . . .