No company is an island -- and if UAL ( UAL) sinks, it will have broad implications for creditors, competitors and suppliers. Now that the federal government has denied the parent of United Airlines' $1.8 billion request for a government-backed loan, UAL is expected to file for Chapter 11 in the coming weeks. UAL's bankruptcy filing would be the largest in the history of commercial aviation. The ripple effects will be felt by competitors like AMR's ( AMR) American Airlines unit as well as UAL's creditors and suppliers, many of which will never see payment for services rendered. A bankruptcy judge will ultimately determine who gets paid and how much they get, but an early look shows that a UAL bankruptcy would pinch business at some of America's largest companies. Before being halted, UAL shares fell 59% to $1.28 Thursday on the news.
Employees and Equity Holders
Tops on the list of losers are current stockholders, who will get nothing for their shares once UAL files Chapter 11, something analysts stressed on Thursday morning. "We expect shares in UAL, currently at $3, to be essentially worthless by the end of the month," wrote Jamie Baker, analyst for J.P. Morgan, in a research report. Of course, another loser likely will be UAL itself, which might never escape bankruptcy -- joining Eastern, TWA and Midway in aviation's dustbin. And UAL's employees, who likely would lose their 55% ownership stake in the company, along with decades of hard-fought negotiation for better benefits and pay, would shoulder the heaviest burden. The enmity felt if employees lose their 55% ownership stake in the company could make it even harder for UAL to reorganize and re-emerge from bankruptcy as a success. United will cut capacity and even more jobs under Chapter 11, further alienating a labor base that has been growing increasingly frustrated, not only with management, but with its own labor leadership.