New United bankruptcy filing includes Eagle County
A new United Airlines’ bankruptcy filing Monday could terminate a 10-year agreement with the Eagle County Air Terminal Corporation, county Administrator Jack Ingstad said.
“Although there might not be any immediate impact on passengers flying into Eagle County Regional Airport,” Ingstad said, “there could be a long-term negative impact on revenue that repays the debt bond on the terminal.”
The Eagle County Air Terminal Corporation, which consists of the three county commissioners and airport officials, acts as the holding company for the $15 million in airport bonds. The air terminal corporation serves to keep county taxpayers from being stuck with the bill if the bottom drops out of the airline industry.
Revenue that American Airlines and United Airlines make by flying into Eagle County guarantee that those bonds will be paid, Ingstad. The $15 million paid for the airport expansion.
If the U.S. Bankruptcy Court approves terminating United’s Eagle County lease, the county could lose United Airlines’ part of the guarantees on those $15 million in bonds, but necessarily the revenue itself.
In 2001, United Airlines signed a 10-year lease with a number of guarantees in case revenues weren’t available to repay the bonds, Ingstad said.
“Their agreement protected us, but now it will probably be voided,” Ingstad said. “They are trying to reduce their exposure by cutting contracts.
“I’m not concerned for the near future. We’re in great shape now,” Ingstad added, “but if the bankrputcy court allows them to restructure, we could lose our contract with them.”
Ingstad said the county doesn’t don’t need those guarantees if everything is fine, like it is now. He said if the county loses revenue from the other airlines, which are under one year contracts, they could need those guarantees.
“We will file an objection to it (petition to terminate contract),” Ingstad said, “but they are a big company with a lot of problems.”
The bright side, however, is that the airline indicated that United Express will keep flying into the county airport, he added.
The airline, which partners with Air Wisconsin for its United Express shuttle service from Eagle County Regional Airport to Denver, operates nine daily flights to and from Denver in winter.
“There’s no cause for alarm,” Davidson said. “We will need to negotiate with Air Wisconsin.”
Although Air Wisconsin operates United Express flights, United Airlines pays the county about $800,000 for rent space at the airport.
“The airline has indicated it wants to continue with a one-year lease,” Ingstad said. “To us, that actually means more money in the short term because one-year leases cost more. But in the long term, we don’t know what will happen.”
Ingstad said the county wouldn’t see an impact in passengers in the next months. He said current service will take the area through the ski season.
“That’s another reason to secure the summer flight program we are working on, to diversify the area’s economy,” Ingstad said.
United Airlines is the second-largest US carrier, and followed rival US Airways into bankruptcy. US Airways is the nation’s sixth-largest airline.
United Airlines’ chairman and chief executive Jack Creighton has repeatedly said the struggling airline needed to make changes that are “urgent significant and immediate.”
Among the problems United faces is restructuring labor contracts with its union employees. The carrier was already preparing to file for Chapter 11 protection when those negotiations failed.
United is owned 55 percent by employees. The airline proposed cutting wages by about 10 percent in return for shares and promises of future wage rises.
So far the airline has won agreement only with pilots, who are reportedly growing impatient with other unions.
“We just wish that the other employee groups would get on board as we have and face reality,” pilots spokesman Steve Derebey told the BBC. “It’s time for the others to wake up and smell the coffee.”
The downturn in United’s fortunes comes as U.S. airlines continue to struggle with the after effects of the September 11 attacks, which have seen passenger numbers slump.
“The world has changed,” Creighton told the BBC. “Revenue isn’t coming back the way the industry expected. Demand isn’t returning, fares remain low, and the industry is grappling with how to respond.”
United filed for Chapter 11 bankruptcy after the Air Transportation Stabilization Board, set up to help airlines after the September 11 attacks, balked at United’s request to guarantee $1.8 billion of a $2 billion loan.
American Airlines, the world’s largest airline, is cutting 7,000 jobs and scrapping plane orders to cut costs. The company hopes the cutbacks will save it more than $1.1 billion a year, and said the changes were necessary if it was to become profitable again and have a long-term future.
Veronica Whitney can be reached at 949-0555, ext. 454, or at email@example.com.
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