Source: Denver Post
Author: Al Lewis

Nobody at United Airlines uses the L-word: liquidation.

Not the top executives, who get paid to navigate the carrier through the perils of Chapter 11 bankruptcy.

Not the creditors, who know there are already plenty of used jets mothballed in the Mojave Desert.

Not the employees, who've made enormous sacrifices to keep their jobs and their company intact.

Not municipal or airport officials in the cities United serves.

Not even the customers, who would lose their long-saved frequent-flier miles.

"They don't say 'liquidation' for the same reason you and I don't say, 'suicide,"' Evergreen aviation consultant Mike Boyd said. "It would be a bloodbath for creditors and a disaster for the employees and the consumers. It would be the worst thing that could happen."

"But somebody has to say it," said Anthony Sabino, a business law professor at St. John's University in New York. "That's a cold-hearted reality that I think people may have to face up to."

United is in its third year of bankruptcy. Earlier this week, the airline said it may not be able to emerge from bankruptcy until next year.

The airline also announced another delay in filing its "disclosure statement" and "plan of reorganization" - two documents that would explain how United plans to be profitable again.

United blamed a 13-member creditors committee for the delay. It said the committee, which represents hundreds of creditors, simply needed more time.

"Both parties agree that this approach and timing can help facilitate an even smoother exit process," the airline said in a news release.

Nothing at United Airlines can be accurately called smooth except the talk.

"United didn't do its homework," Sabino said. "Part of this process involves getting most of the creditors on board. United didn't do that."

So allow me to translate United's statement: Our creditors don't understand our plan to get out of bankruptcy because we don't really have one. We believe we can malinger in bankruptcy court for perpetuity. If we said in 2003 that we'd be out in 2004, we can say in 2005 that we'll be out in 2006. And in 2007 we can come up with another story about an even smoother exit process.

"This thing has just been a giant joy ride for consultants, analysts and lawyers," Boyd said. "The people at the top don't have the ability to put a plan together to get out of bankruptcy."

He predicts creditors will toss United's management before they let the airline crash into liquidation.

Of course, first the bankruptcy court will tire of United's attempts to reorganize its debts, and it will allow a creditors group to do it. Perhaps the time for this decision is coming soon.

United hasn't earned a nickel in five years. It has lost more than $7 billion since December 2002, when it filed Chapter 11. United reported losses of more than $1.4 billion for the second quarter of this year. Almost all of the losses were due to cost-cutting efforts.

United emphasized operating earnings of $48 million for the second quarter. That's a spark of hope, but what I hear United saying is: We would be profitable if it wasn't for all those pesky expenses.

On the plus side, United CEO Glenn Tilton has led two rounds of wage and benefit cuts and ditched employee pension plans, if you can call that a plus.

Overall, Tilton has cut more than $7 billion in operating expenses. But no matter how much he cuts, oil prices keep rising.

United had pegged its hopes on $50-a- barrel oil. Now oil is at record highs of nearly $62. Meanwhile, competition from discount airlines continues to dampen United's ability to raise ticket prices.

Aside from taking the hatchet to its employees and starting a discount carrier called Ted, Tilton and his team have done little to reinvent the airline.

They need a fluke to get out of bankruptcy. Either ticket prices have to rise, oil prices have to fall or some other airline needs to go out of business.

Nobody wants to say the L-word. It's too horrible to contemplate. But you can't count on a fluke. And, in the meantime, nobody has seen a viable plan for this airline.