Reuters, 12.06.02, 5:57 PM ET
By John Crawley
WASHINGTON, Dec 6 (Reuters) - House Speaker Dennis Hastert on Friday blasted a special government board's rejection this week of a $1.8 billion loan guarantee request by United Airlines (nyse: UAL - news - people), a major employer in his home state of Illinois and the nation's second largest airline.
"This is clearly a wrongheaded decision for our nation's economy on so many grounds," Hastert said in an usually strongly worded statement.
Hastert, a Republican, led a high-profile lobbying campaign on behalf of Chicago-based United, which employs 83,000 people and could be headed for bankruptcy court in the coming days.
He discussed the matter with President George W. Bush and his senior economic advisers, including ousted Treasury Secretary Paul O'Neill, in the weeks before Wednesday's decision by the Air Transportation Stabilization Board.
O'Neill, who resigned under pressure on Friday along with top White House economic adviser Lawrence Lindsey, designated Treasury undersecretary Peter Fisher as his representative on the three-member stabilization board. Fisher and Federal Reserve Gov. Edward Gramlich were the decisive votes in rejecting United's application.
In a statement, Fisher said that United's business plan was "fundamentally flawed." The board questioned United's revenue projections and its ability to repay any loan supported by a federal credit guarantee.
Industry sources have said the stabilization board's refusal to grant United a loan guarantee will likely force it to seek Chapter 11 bankruptcy protection perhaps as early as this weekend.
"The timing of the ATSB's ruling could not have been worse," Hastert said. "We're in the midst of the busiest travel season of the year and it simply does not make sense for the federal government to shake the confidence of the traveling public at this critical time."
Separately, the union representing 13,000 machinists and other workers at United called on Bush to immediately reconsider the stabilization board's decision now that O'Neill has resigned.
"The decision by O'Neill's designee to withhold critical financial assistance to United Airlines must not be allowed to stand,' said Thomas Buffenbarger, president of the International Association of Machinists.
A presidential spokeswoman said the White House respected the board's decision.