Nov 5, 2002 By Dave Carpenter Ap Business Writer 3 min read

CHICAGO (AP) – United Airlines’ long-sagging stock leaped dramatically higher Monday, reflecting hopes a tentative $2.2 billion cost-cutting deal with pilots has lessened the chances that the restructuring carrier will veer into bankruptcy. Adding to investors’ optimism was CEO Glenn Tilton’s remark that similar agreements could be reached as soon as this week with the other groups whose participation is needed to reach the targeted $5.8 billion in labor savings.

It could still be weeks, however, before United and its parent company UAL Corp. know whether the concessions are enough to persuade the government to approve its application for a $1.8 billion loan guarantee.

“While the pilot proposal adds credence to UAL’s proposed $5.8 billion labor package, it doesn’t answer the fundamental question: ‘Is $5.8 billion enough?”‘ J.P. Morgan airline analyst Jamie Baker said in a note to investors.

UAL shares jumped 63 cents, or 25 percent, to $3.19 in afternoon trading on the New York Stock Exchange after climbing as much as 37 percent. It’s the stock’s highest level in five weeks, though still down about 90 percent since before last year’s terrorist attacks.

Facing $945 million in debt payments by mid-December, United has warned it may file for Chapter 11 bankruptcy-court protection by year’s end without an infusion of cash. It still needs to reach agreements on cuts involving machinists, flight attendants and salaried employees as part of an overhaul to make it more competitive and return it to profitability after 21/2 years of losses.

Without concessions from the other groups, it has scant chance of receiving the $1.8 billion federal backing for a $2 billion bank loan.

Spokesmen for the machinists and flight attendants remained mum on the status of continuing negotiations Monday and said there was no deadline for reaching agreements.

Chief executive Tilton, meanwhile, voiced optimism they will soon be received positively.

“The important thing here is that we have a conclusion to the negotiations, despite the fact that many skeptics have been saying that this was going to be a stumbling block in our progress,” he said in the wake of the pilots’ settlement. “That has proven not to be so.

“We expect that others will follow in their tentative agreements here shortly, and perhaps this week,” he said in a taped message to employees.

The five-year agreement being submitted to a vote of United’s 8,800 pilots calls for an immediate 18 percent pay cut and wage freeze for 23 months, followed by 4.5 percent increases in November 2004, May 2005 and May 2006. There also would be unspecified changes in work rules and job reductions.

It carries repercussions throughout the troubled airline industry, where major carriers are working to lower costs to reflect fewer passengers and tougher competition from discount airlines. Other airline stocks also climbed sharply Monday.

With the pilots’ agreement in hand, United is mounting an intensive lobbying campaign to try to secure the loan guarantee from the Air Transportation Stabilization Board.

Tilton said United employees, partners and allies from around the world have sent more than 30,000 letters to Washington in support of the federal loan guarantee.

“The grassroots campaign in support of what it is that we are trying to do – to restructure United to reposition its competitiveness out of court – is certainly gaining momentum,” he said.

In addition, he said, a United management team will travel to Washington this week to present the airline’s case directly to the federal panel.

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