United Airlines chief vows to cut costs as it files for bankruptcy

United Airlines, the world's second-largest carrier, yesterday filed for bankruptcy amid spiralling debts and falling passenger numbers brought about by the faltering US economy and the effects of 11 September. It was the largest such filing in aviation history.

The airline said it would be "business as usual" for customers but officials predicted there would have to be a extensive job cuts and a big reduction in flights if the carrier was to survive.

Glenn Tilton, the chief executive, said: "During the Chapter 11 process, we will go further and deeper in our efforts to reduce our costs. We are developing a very compelling plan of reorganisation that will enable us to successfully emerge as a stronger company with a competitive cost structure."

Yesterday's filing by the Chicago-based airline followed the posting of more than $4bn of losses since the attacks of 11 September, when two of its Boeings were hijacked by al-Qa'ida. As with the rest of the US airline industry, United has been struggling to recoup passengers put off flying.

In addition, the airline has seen a big drop in the number of business class seats being sold as passengers have opted for economy fares in the light of America's ongoing economic downturn. For a company with a history of labour troubles and some of the highest wage costs in the industry, the downturn has proved too difficult to navigate. Only last week the US government rejected the airline's bid for $1.8bn in federal loan guarantees, which had been its last hope for securing fresh capital.

Instead the airline has turned to the private sector to secure $1.5bn in financing to see it through bankruptcy and allow it to continue operating. The CIT Group, JP Morgan Chase, Citibank and Bank One were apparently prepared to offer the financing, realising that their credit would be the first to be repaid. United's partner in the Star Alliance, Lufthansa, said it was in talks to offer a loan of between $100m-$200m, and added that the filing by United have no effect on the alliance.

While the package will allow United to keep operating, experts said in the longer term the airline would have to undergo a major streamlining if it is to survive against the competition from smaller, leaner operators such as Southwest and JetBlue.

Gary Chase, an airline analyst at Lehman Brothers, said: "United and its employees and suppliers have to quickly address the company's heavy cash burn in order to ensure a successful reorganisation."

United is 55 per cent owned by its 83,000 employees. Leaders of its unions last month agreed to a total of $5.2bn in wage cuts over the next five-and-half years but rank-and-file mechanics rejected their $700m part of the deal, severely damaging the bail-out plan.