Retail in doubt following United bankruptcy

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United Airlines has filed for bankruptcy under chapter 11 of the US Bankruptcy Code, following a failed attempt to secure a $1.8bn US government loan guarantee

The move follows substantial losses since September 11 2001, due to changes in consumer behaviour and the reduction in business travel patterns. The company also faces $875m in debt maturities due during the fourth quarter of 2002.

In a company statement United Airlines said its global operations will be maintained while it develops a plan of reorganisation to address its existing debt, capital and cost structures. Current and future tickets on United flights will be honoured, and the airline will continue to participate in the Star Alliance network. However, staff at the company will
undergo further pay cuts in an effort to address financial losses.

United's onboard product manager Annette Gutsmiedl told TRW that she hoped inflight retail would be unaffected. "We will continue to offer the same service to our customers, and I hope we will be able to maintain our relationship with [concessionaire] Inflight Sales Group."

The Financial Times newspaper commented that filing for bankruptcy could offer only a short-lived reprieve. In the event of an Iraq war [the airline] is likely to need government aid to survive, the paper said.

In other news, Manuel Guedes has been named interim president of Brazilian carrier Varig two days after its chief executive Arnim Lore resigned. Guedes said he would present a restructuring proposal for Varig, which, like United, has been hit by rising costs and the downturn in the airline industry since September 11. Varig currently has debts totalling $900m. Guedes said he would immediately restart talks with Brazil's national development bank about an aid package for the airline.

Inflight Sales Group was unavailable for comment as the story went online.