United Airlines, the primary subsidiary of the UAL Corporation, is a major airline of the United States with its headquarters located in unincorporated Elk Grove Township, Illinois, near its largest hub at Chicago's O'Hare International Airport.
As of December 31, 2005, it was the world's fourth-largest airline in terms of total passengers transported (behind American Airlines, Delta Air Lines and Southwest Airlines), second-largest in terms of revenue-passenger-kilometers (behind American Airlines), and third-largest in terms of total operating revenues (behind Air France-KLM and American Airlines). It employs around 57,000 people and operates about 460 aircraft.
On February 1, 2006, United emerged from Chapter 11 bankruptcy protection under which it had operated since December 9, 2002, the largest and longest airline bankruptcy case in history.
UAL traces its claim to be the oldest commercial airline in the United States to the air mail service of Walter Varney. Varney's chief pilot, Leon D. "Lee" Cuddeback, flew the first Contract Air Mail flight in a Swallow biplane from Varney's headquarters in Boise, Idaho to the railroad mail hub of Pasco, Washington on April 6, 1926 and returned the following day with 200 pounds of mail. April 6th is reckoned in the United Airlines company history as both its own birthday and date on which "true" airline transport—operating on fixed routes and fixed schedules—began. Varney Airlines' original 1925 hangar served as a portion of the terminal building for the Boise Airport until 2003, when the structure was replaced.
In 1927, airplane pioneer William Boeing founded his own airline, Boeing Air Transport, and soon began buying other airmail carriers, including Varney's. Within four years, Boeing's holdings would grow to include a number of airlines, airplane and parts manufacturing companies, and several airports. In 1929, the company changed its name to United Aircraft - Transport Corp.
In 1930, as the capacity of airplanes proved sufficient to carry not only mail but also passengers, Boeing Air Transport hired a registered nurse, Ellen Church, to assist passengers. United claims Church as the first airline stewardess.
Following the Air Mail Scandal of 1930, the Air Mail Act of 1934 banned the common ownership of manufacturers and airlines. United Aircraft-Transport's President Philip G. Johnson was forced to resign and went on to Trans-Canada Airlines, the future Air Canada. William Boeing's company was broken into three: a parts supplier (the future United Technologies), an aircraft manufacturer (the Boeing Airplane Company), and an airline group—United Air Lines. The airline company's new president, hired to make a fresh start as airmail contracts were re-awarded in 1934, was William A. Patterson, who remained as president of United Airlines until 1963.
United benefited from the dot-com boom, which boosted traffic to its San Francisco hub, but failed to keep its costs under control and entered a downward spiral of losses after the bubble burst. In 2001, the company lost $2.14 billion on revenues of $16.14 billion and applied for a $1.5 billion loan guarantee from the federal Air Transportation Stabilization Board established in the wake of the September 11 attacks. When the application was rejected in late 2002, the company was forced to seek debtor-in-possession financing from commercial sources to cover the expected future losses.
Unable to secure additional capital, UAL Corporation filed for chapter 11 protection against bankruptcy in December. The ESOP was terminated, although by then its shares had become virtually worthless. Blame for the bankruptcy has fallen on the events of September 11, which triggered financial crisis in all the major North American airlines. However, the rise of low-cost carriers, labor disputes, and problems within the management structure of the company also contributed significantly.
United has continued operations during its bankruptcy, but has been forced to cut its costs drastically and under delicate terms. Tens of thousands of workers were furloughed, and all city ticket offices in the US closed. It cancelled several existing and planned routes, and eliminated its entire Latin American gateway and flight crew base at Miami International Airport after March 1, 2004.
At the same time, the airline has continued to invest in new projects. On November 12, 2003, it launched a new low-cost carrier, Ted, to compete with other low-cost airlines. In 2004 it launched its luxury "p.s." (for "premium service") service on re-configured 757s from JFK Airport in New York City to Los Angeles and San Francisco. The service is targeted to attract business customers and high-end leisure customers in the coast-to-coast market.
On December 9, 2004, the airline made history when UA869 (747-400) landed at Ho Chi Minh City, Vietnam. The scheduled flight from San Francisco via Hong Kong was the first by a U.S. airline since the end of the Vietnam War, when Pan Am halted service shortly before the fall of Saigon.
Financial pressure on the airline remains heavy. The SARS epidemic in 2003 depressed traffic on United's extensive Pacific network. The soaring cost of jet fuel in the aftermath of the 2003 Iraq war has also eaten away at profits. United has made, withdrawn, and followed several fare hikes on overseas routes, citing rising fuel costs, in 2004 and 2005. Indeed, two days after its triumphant first flight to Vietnam, United announced that it would cut U.S. flight capacity by 14% after the holidays and add more international flights, which are more profitable.
United has taken advantage of its Chapter 11 status to negotiate hard-to-cut costs with employees, suppliers, and contractors, including cancellation of feeder contracts with United Express Atlantic Coast Airlines (which became Independence Air) and Air Wisconsin (which became a US Airways Express carrier).
Most controversial of all, however, was the 2005 cancellation of its pension plan, the largest such default in U.S. corporate history. It renegotiated its contracts with the pilots' and mechanics' unions for lower pay; however, the Association of Flight Attendants resisted until the bankruptcy court ruled in United's favor. Criticism was also leveled at the CEO, Glenn Tilton, for demanding pay cuts from employees while receiving the highest salary of any major U.S. airline CEO. Although Tilton's salary was the highest in the industry, his pay mix did not include the level of stock options and bonuses granted to his counterparts.
Originally slated to exit bankruptcy protection after 2½ years in the third quarter of 2005, United requested yet another extension in light of record-high fuel prices. On August 26, 2005, the bankruptcy court extended the airline's exclusive right to file a reorganization plan to November 1, although it also stated firmly this extension would be the last. United announced at the same time it had raised $3 billion in exit financing and filed its Plan of Reorganization, as announced, on September 7, 2005.
The bankruptcy court approved the restructuring plan on January 20, 2006, clearing the way for United to exit bankruptcy on February 1, 2006, and finally return to normal operations. Its emergence as a smaller, much more efficient carrier has in turn put additional pressure on its competitors to reduce costs and capacity.