Retailers braced for fallout from United Airlines bankruptcy

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The world's second largest airline United Airlines is struggling to stay afloat and has filed for bankruptcy in a US court today, marking the travel industry's biggest corporate collapse to date

The move is designed to give the airline temporary protection from its creditors while it puts together a $1.5bn restructuring plan to meet debt repayments due this month. Last week United's application for a loan from the Air Transport Stabilisation Board (ATSB), set up to help US airlines in the wake of the September 11 attacks, was rejected.

The US airline industry is suffering through its worst financial crisis ever, as economic recession and terrorist attacks combine to drag down demand and airfares to 15-year lows. US airlines lost an estimated $7bn last year and a similar loss is forecast for 2002. United lost $2.1bn last year and is expected to lose $2.5bn this year.

Meanwhile travel-retail operators at United's hub airports Chicago, Los Angeles, San Francisco, Washington and Denver International, are bracing themselves for the fall out. For example at Denver, United together with United Express controls more than 60% of passenger traffic and employs 7,500 people. A Denver airport survey in August concluded that a United bankruptcy would drive its passenger traffic 12% below projections for 2003. Transit traffic could also fall by 30% with dramatic effect on the airport's $127m concession revenues.

In bankruptcy United's shareholders - mostly employees - are likely to lose the value of their shares, staff contracts could be voided and the carrier might have to slash its operations and sell valuable assets such as its trans-Pacific routes. Analysts now expect cutbacks in routes to be greater than the 23% announced earlier this year. The United Airlines onboard concession is operated by Inflight Sales Group.