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United Airlines: Dot-Com Boom To Bankruptcy To Reorganization

Significantly boosting traffic to the San Francisco hub, United benefited hugely from the boom era of the dot-com world. When United failed to keep operational costs of their online transactions under control, and the entire dot-com industry’s bottom fell out, United Airlines struggled to remain afloat.

United Airlines lost approximately $2.14 billion on online revenues and then applied for a loan of $1.5 billion from the federal Air Transportation Stabilization Board. This government board had been established in the aftermath of the September 11 events in an attempt to help the nation’s airlines recover from lacking demand and revenues.

Though much blame is placed on September 11, United Airline’s decision to declare chapter 11 bankruptcy included many other factors that had been in place for long before September 11 and United’s money problems. Labor disputes, the rising cost of so-called low-cost carriers and problems in the management structure of the company all contributed to the financial situation of United Airlines.

After declaring bankruptcy, United continued to operate as well as to invest in new programs. In 2003 they launched a new carrier service that was intended to compete with low-cost carriers in the national coast-to-coast market including both business and high end leisure travelers.

In order to counter the rising fuel costs in 2004 and 2005, United introduced many fare increases as well as cut overall operations by fourteen percent in an attempt to reorganize and rehabilitate the airline.

Along with rate hikes United Airlines also cut many aspects of employee’s wages and benefits. The most controversial was in 2005 when United decided to cancel their pension plan. This huge blow to their employees is the largest default of its kind in United States corporate history.

Throughout 2005 and in the beginning of 2006 United kept extending terms of its bankruptcy and plans to emerge as a smaller but better run airline. Other major airlines are struggling to complete with their lower airfare. Only time will tell how successful United is at full reorganization over the coming months and years.

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