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Bankruptcy and reorganization

Airbus A320-200 landing at Norman Y. Mineta San Jose International Airport.
With a strong presence on the West coast, United benefited from the dot-com boom which boosted traffic (especially premium traffic) to the San Francisco hub. This increase was only temporary and when the bubble finally burst, United was in a worse position than before because it had failed to keep costs under control, possibly due to giving its pilots pay raises of up to 28% in the summer of 2000.[28] Coupled with a battered network, the September 11 attacks and skyrocketing oil prices, the company lost $2.14 billion in 2001 on revenues of $16.14 billion. In the same year United applied for a $1.5 billion loan guarantee from the federal Air Transportation Stabilization Board established in the wake of the September 11 attacks. When the IAM union failed to approve the loan guarantee—while all other unions approved it—the application was rejected in late 2002 and the company was forced to seek debtor-in-possession financing from commercial sources to cover the expected future losses. United made several attempts to obtain the government loans, even enlisting several congressmen and senators for help. The government rejected the application claiming United "could probably obtain the $2 billion in financing it needs to emerge from protection without a federal loan guarantee".
Unable to secure additional capital, UAL Corporation filed for chapter 11 bankruptcy protection in December 2002. The ESOP was terminated, although by then its shares had become virtually worthless. Blame for the bankruptcy has fallen on the events of September 11, which triggered financial crisis in all the major North American airlines, coupled with the economic slowdown that was underway.
United continued operations during its bankruptcy, but was forced to cut its costs drastically. Tens of thousands of workers were furloughed, and all city ticket offices in the US closed. The airline canceled several existing and planned routes, and eliminated its entire Latin American gateway and flight crew base at Miami International Airport after March 1, 2004. Furthermore, they reduced their mainline fleet from 557 (before 9/11) to 460 aircraft.

At the same time, the airline continued to invest in new projects. On November 12, 2003, it launched a new low-cost carrier, Ted, to compete with other low-cost airlines. In 2004 it launched its luxury "p.s." (for "premium service") service on re-configured 757s from JFK Airport in New York City to Los Angeles and San Francisco. The service was targeted to business customers and high-end leisure customers in the coast-to-coast market. In February 2004, the airline introduced the new Blue and White livery with the Blue Tulip on the tail to coincide with a new advertising campaign.
Financial pressure on the airline was heavy. The SARS epidemic in 2003 depressed traffic on United's extensive Pacific network. The soaring cost of jet fuel ate away remaining profits United made. United implemented several fare hikes on overseas routes, citing rising fuel costs, in 2004 and 2005. Two days after its triumphant first flight to Vietnam, United announced that it would cut U.S. flight capacity by 14% after the holidays and add more international flights, which were more profitable.

United took advantage of its Chapter 11 status to negotiate hard-to-cut costs with employees, suppliers, and contractors, including cancellation of feeder contracts with United Express carriers Atlantic Coast Airlines (which became Independence Air) and Air Wisconsin (which became a US Airways Express carrier).
Most controversial of all, however, was the 2005 cancellation of its pension plan, the largest such default in U.S. corporate history. It renegotiated its contracts with the pilots' and mechanics' unions and the Association of Flight Attendants for lower pay. Criticism was also leveled at the CEO, Glenn Tilton, for demanding pay cuts from employees while receiving the highest salary of any major U.S. airline CEO.
Originally slated to exit bankruptcy protection after 2½ years in the third quarter of 2005, United requested yet another extension in light of record-high fuel prices. On August 26, 2005, the bankruptcy court extended the airline's exclusive right to file a reorganization plan to November 1, although it also stated firmly this extension would be the last. United announced at the same time it had raised $3 billion in exit financing and filed its Plan of Reorganization, as announced, on September 7, 2005.
The bankruptcy court approved the restructuring plan on January 20, 2006, clearing the way for United to exit bankruptcy on February 1, 2006, and finally return to normal operations.

Beyond Chapter 11

On December 9, 2004, the airline made history when UA869 (747–400) landed at Ho Chi Minh City (formerly Saigon), Vietnam. The scheduled flight from San Francisco via Hong Kong (SFO–HKG–SGN) was the first by a U.S. airline since the end of the Vietnam War, when Pan Am halted service shortly before the fall of Saigon in 1975.
United's management called for consolidation in the industry and looked for a suitor in 2006. The Wall Street Journal revealed in late 2006, that Continental Airlines was in merger discussions with United. A deal was not "certain or imminent," with the talks being in a preliminary state. In the interim, it increased its ties with British carrier BMI and Aloha Airlines. In April 2007, United and British carrier BMI announced that they would 'effectively merge their trans-Atlantic operations'.[35][36] The merged operations would have begun in March 2008, however Lufthansa’s takeover of BMI preempted the two carrier’s plans when BMI’s transatlantic flights were terminated. United’s May 2007 acquisition of an equity stake in its longtime partner Aloha Airlines was short-lived as Aloha ceased operations in March 2008. On June 14, 2007, CFO Jake Brace said his company is still looking to tie the knot with a suitable merger partner.

In the years following United’s exit from bankruptcy, two large financial firms, Bank of America and Fidelity Investments, accumulated shares to become the second largest owner with an 11 percent stake in the company.[39] As mentioned earlier, the industry environment was ripe with pressures to merge and consolidate. Pardus Capital Management LP, a hedge fund that owned 7 million shares of Delta and 5.6 million shares of United, called for the two carriers to merge. This action sent shares of both airlines up but this was short-lived and became moot because Delta wedded Northwest.
The surge in jet fuel prices caused disruption to United’s impending start of non-stop long-haul services. Though the FAA had already awarded the SFO to Guangzhou, China to United, they postponed the launch citing high fuel prices. Other long-haul city pairs, such as its 2009 application to fly between Los Angeles and Shanghai (which began May 2011) were denied by the FAA.
During this time of turmoil brought on by external forces, United explored options to reestablish its financial footing and raise capital.

      These changes included:
               Divesting of the Maintenance, Repair and Overhaul operations at SFO.
               Spinning off the cargo division.
               Spinning off the Mileage Plus frequent flier program.
               These spin-offs and divestitures have not come to fruition.