UAL Corp.’s shopping excursion for reorganization take-out financing has apparently resulted in a preliminary commitment of a cool $3 billion in financing from four lending lending institutions that, if consummated, would allow the troubled airline to emerge from over three years in chapter 11. The four lenders involved in the negotiations with UAL are apparently Citigroup Inc., J.P. Morgan Chase & Co., General Electric Co. and Deutsche Bank AG.
The take-out financing would allow UAL to repay a $1.3 billion debtor-in-possession loan it has been relying on during its chapter 11 case, and will be incorporated in a reorganization plan that the company plans to file with its Chicago Bankruptcy Court soon. In the meantime, UAL continues to bleed, incurring a net loss of almost $275 million for July as the company incurs huge non-cash reorganization expenses relating to renegotiation of leases on key aircraft.

Meanwhile, Northwest Airlines contemplates replacing UAL in chapter 11 — perhaps prior to October 17 — as it continues to deal with a machinist’s union strike. Although Northwest reported decent liquidity of $2.1 billion as of June 30, the company is currently heading toward four straight years of operating losses, most recently reporting net losses of $450 million in the first quarter and $217 million in the second quarter of this year. In addition to ever-increasing fuel prices, Northwest is also trying to figure out a way to deal with its various pension plans, which are currently underfunded to the tune of $3.8 billion.
As has been noted before here, it’s darn hard to pull the plug on even an incredibly unprofitable airline.