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chances of United Airlines being able to reverse the
rejection of its request for $1.6 billion in federal loan
guarantees dimmed yesterday, though the airline has yet to
submit a third version of its application.
The likelihood of another defeat grew after the Treasury
Department came out in support of its representative on the
Air Transportation Stabilization Board, Under Secretary
Brian C. Roseboro.
Last Thursday, Mr. Roseboro and Federal Reserve Governor
Edward M. Gramlich voted against United's application. The
board's third member, Jeffrey N. Shane of the Transportation
Department, abstained, saying that United, a unit of the UAL
Corporation, should be allowed to provide additional
information in support of its request.
After the vote, the Treasury and Transportation
departments said the airline would be given time to try
again despite the "no" votes of its representatives.
Other airlines have also been given the opportunity to
re-apply after a rejection, notably Spirit Airlines, which
did not ultimately receive a loan guarantee. But United is
the only carrier to be given three chances. The original
deadline for new applications passed two years ago.
The offer of another opportunity came after an appeal to
John W. Snow, the Treasury Secretary, by House Speaker J.
Dennis Hastert, Republican of Illinois, United's home state.
A senior White House aide also called Mr. Snow to express
concern at the rejection, a department official said on
Friday.
Over the weekend there was speculation that Mr. Roseboro
might be replaced on the board by another official who would
agree to vote in United's favor. The issue was discussed at
a meeting of Treasury officials yesterday, people with
knowledge of the discussions said, but no decision was made.
The department's chief spokesman, Robert Nichols, said
afterward, "There is no change in our A.T.S.B.
representation." He added, "There are no plans for any
change."
United said on Friday that it would resubmit its
application within days, but it did not do so yesterday. A
United spokeswoman declined to comment.
The airline was said to be planning to reduce the amount
of the loan guarantees it requests, and to ask for a shorter
guarantee than the usual seven years, while seeking more
private financing to supplement the federally backed loans.
Even so, officials at the Treasury and the air board said
that United was down to its last chance, and that in order
to win approval, it would have to "seriously address" its
plan for paying back any loans it receives as well as other
requirements.
In rejecting United's application last week, the board
said the airline had not shown that it was a "necessary
part" of the nation's commercial aviation system. Neither
had it shown, the board said, that it could not get the
capital it needs on its own.
United filed for Chapter 11 bankruptcy in December 2002
after the loan board rejected its first application, which
requested $1.8 billion in guarantees. The revised
application it submitted last December was for a $1.6
billion package. Since then, United has arranged a total of
$2 billion in exit financing from J. P. Morgan and Citibank,
including $400 million from the two banks, but that
financing is contingent on winning approval from the air
board. The Wall Street Journal reported yesterday that
United might ask for as little as $1 billion in guarantees
in a revised application.
Still, United executives have maintained that the airline
could emerge from bankruptcy protection with or without loan
guarantees. Indeed, the air board's executive director,
Michael Kestenbaum, told the airline last week that the
board believed that "the likelihood of United succeeding
without a loan guarantee is sufficiently high so as to make
a loan guarantee unnecessary."
The vote alarmed United's political supporters in
Washington, particularly Mr. Hastert, who has lobbied
heavily on the airline's behalf.
Mr. Nichols at the Treasury Department said Mr. Hastert's
participation was not unusual and that members of Congress
lobby federal agencies and the White House all the time.
Mr. Hastert himself has repeatedly defended his role,
saying that lobbying for United was the right thing to do.
But Senator Peter Fitzgerald, also an Illinois
Republican, said he would seek an investigation into Mr.
Hastert's actions. Speaking in Chicago, Mr. Fitzgerald said
he would write to the inspector general of the Treasury
asking whether "any undue political muscle is being applied
to members of the board from anyone in the Treasury
Department or in Congress" to reverse the rejection.
Mr. Fitzgerald said he also was considering asking the
General Accounting Office to investigate.
"The statute and the regulations have very specific loan
criteria, and they do not include what the speaker of the
House thinks about the matter," Mr. Fitzgerald said in a
telephone interview.
Mr. Fitzgerald was the only member of Congress to oppose
the legislation that originally created the air board in the
aftermath of the Sept. 11 terrorist attacks.
Mr. Fitzgerald said loan guarantees would only hinder the
company's ultimate recovery. "The problem with a federal
subsidy," he said, "is that it could delay the sorts of
pruning and cutbacks that United may continue to need to
make."
Illinois' other senator, Richard J. Durbin, a Democrat,
encouraged the board to "look favorably" on a new
application by United.
"It's important for this major Illinois employer to get
it, so it can move out of bankruptcy," Mr. Durbin said.
Edmund L. Andrews in Washington and Jo Napolitano in
Chicago contributed reporting for this article.