The promise of continued success in the new millennium quickly evaporated as the "perfect storm" began to develop in 2000.  An economic downturn of global proportions, protracted labor negotiations, a proposed merger with US Airways and the tragedy of Sept. 11, 2001, hit United hard.  For the year 2001, the company suffered a record loss of $2.1 billion.  By mid-2002, United was asking employees to make wage concessions and asking the U.S. government for a loan to help the company back to financial stability.

Stormy Skies Ahead
High-tech industries on the U.S. West Coast were among the first to feel the squeeze of the weakening economy in 2000.  The subsequent fall-off in business travel cut deeply into United's most lucrative customer base.

The ESOP investment period ended in April 2000 for most U.S. employees, unleashing a pent-up demand for higher wages.  Labor negotiations with the pilots and machinists stalled, then turned turbulent when United announced a proposed merger with US Airways.  Labor issues, air traffic congestion and poor weather forced United to slash 7,000 flights from its schedule through September and implement widespread flight cancellations.  Those actions damaged the company's image and alienated customers, prompting United to air a TV ad in which Chairman Jim Goodwin apologized to travelers.  The dismal year was reflected in earnings for 2000, which fell to $332 million, down from $778 million in 1999.

Despite these issues, United updated its business with innovations such as interline electronic ticketing service, airport gate readers and providing customers with flight information via a proactive paging service.  While labor issues and a weak economy persisted in 2001, United invested in more technology to make travel easier and the airport experience less of a hassle.  The company also began developing a business jet subsidiary. 

The US Airways deal collapsed in mid-2001, due to lack of support from the U.S. government and employees.  Then came the tragedy of Sept. 11.  The sudden, steep decline in air travel forced the company to furlough 20,000 employees.  Amid growing concerns about United's situation, Chairman and CEO Jim Goodwin resigned late in the year and was succeeded by UAL board member Jack Creighton, who accepted the job on an interim basis while the company searched for a new, permanent leader.  The company ended 2001 with a record loss of $2.1 billion.

As losses continued in 2002, the company 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 Corp. filed for Chapter 11 reorganization.  The company 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 United 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.