UAL Corporation - History

History

UAL, Inc., as the company was first known, was incorporated December 30, 1968 as a Delaware corporation as part of a reorganization of United Airlines, now its largest subsidiary, whose history is considerably longer. UAL, Inc. was the creation of then United Air Lines president George Keck, who formed the holding company to allow United to diversify.

Between 1970 and 1988 UAL, Inc. would acquire and operate the Westin and Hilton hotel chains and the Hertz Corporation car rental company, as well as a regional airline, a reservations network, and several leasing and insurance companies. On April 30, 1987, UAL, Inc. changed its name to Allegis Corporation. Many Wall Street analysts however believed that Allegis' profitable subsidiaries were worth more individually than the parent company's stock price indicated. Reacting on this sentiment, just weeks after the company changed its name, a group led by United Airlines employees moved to acquire ownership. However, the group was unable to acquire the needed financing and Allegis' management sold its non-airline subsidiaries. On May 26, 1988, Allegis changed its name to UAL Corporation, with United Air Lines, Inc. as its only major subsidiary.

United Airlines employees continued the effort to buy the airline's parent company however and in 1993, the effort moved closer to realization. The Board of Directors of UAL in December 1993 agreed to an Employee Stock Ownership Plan (ESOP), where employees would agree to salary and benefit reductions as well as work rule changes in exchange for stock. Employees would have an equity stake of 55%, thus making them the majority owners of UAL Corporation. UAL became the world's largest employee-owned company.

During the mid-1990s the scheme worked well for UAL. The company was able to turn around its finances, which were weakened by the recession in early part of the decade and the divestiture of Allegis' money-making assets. In the late 1990s UAL's United Airlines subsidiary would grow to be the world's largest airline, as well as one of the most profitable.

Yet in 2000, UAL's fortunes began to dim. In April 2000, the ESOP investment period ended for most US employees, prompting United's unions to fight for higher wages. Labor issues, air traffic congestion and poor weather forced UAL's United unit to implement widespread flight cancellations in the summer of 2000, harming the airline's reputation. Additionally, UAL Corporation announced its intent to merge with US Airways Group, Inc., the operator of American airline US Airways. The deal collapsed in mid-2001, due to lack of support from the U.S. government and employees. Then came the tragedy of September 11. The company ended 2001 with a record loss of $2.1 billion.

As losses continued in 2002, Glenn Tilton, a former Texaco CEO with experience operating a company in bankruptcy, was brought in by UAL's Board of Directors to try and prevent bankruptcy, or, if needed, successfully guide the company through a bankruptcy process. Tilton was appointed Chairman, President, and CEO of UAL Corporation and United Air Lines, Inc. in September 2002. Tilton sought wage cuts from employees and applied for a U.S. government loan guarantee to avoid filing for bankruptcy. By early December, the company had reached agreements with most of its unions for wage reductions, but its loan application was rejected Dec. 4. On Dec. 9, UAL and its subsidiaries filed for Chapter 11 reorganization. UAL quickly received debtor-in-possession (DIP) financing to allow it to continue "business as usual" while it reorganized its debt, capital and cost structures. The year ended with UAL seeking immediate voluntary wage reductions from all employee groups or permission from the bankruptcy court to impose those reductions in order to meet the strict covenants established by the DIP lenders.

What followed would be one of the largest, longest, and most complex bankruptcy cases in US history. UAL Corporation and its subsidiaries emerged from bankruptcy protection on February 1, 2006.

On December 8, 2009, UAL Corporation announced that it has placed an order for 25 Airbus A350 and 25 Boeing 787 aircraft, with purchase rights for 50 more of each aircraft. UAL Corp. will be the second US carrier to operate the Airbus A350.

The years since bankruptcy have been marked by mixed results for UAL. The company turned a profit in 2007, yet the fuel crisis in the summer 2008, where NYMEX Light Sweet Crude reached almost $150 a barrel, pushed the company into losses. To try to put an end to UAL's decades of boom and bust cycles, CEO Tilton has been pushing for a merger with another major US carrier. Tilton has stated he believes that having larger market-share and a more diverse route network are the way for UAL to reach sustainable profitability, though many, including UAL's unions groups, have strongly disagreed. In early 2008 UAL Corporation held merger talks with American airline operator Continental Airlines, Inc. However, the deal was called off after problems in the credit markets, as well as weak support from labor groups, made an official merger impossible. UAL's United instead decided to form an alliance with Continental.

However, in May 2010 United announced a full-scale merger between the two carriers. The new airline will use the trade name United Airlines with the Continental logo.