United blames bankruptcy rumor on old story

September 8, 2008 4:01:36 PM PDT
United Airlines' stock plunged nearly 75 percent in early trading Monday after a six-year-old Chicago Tribune story about the airline's 2002 bankruptcy filing resurfaced on the internet. There is now an investigation into how it happened. The falling stock price was especially dramatic considering stocks overall gained Monday morning. Trading of United shares came to a halt as the company tried to clear up the situation. Trading resumed by mid-afternoon. The stock did recover, but the false report did hurt an already struggling airline.

During the past few years, it's been a bumpy ride for United Airlines, and Monday's mistake just added insult to injury. The Chicago-based airline's stock plummeted after an old news report hit the web and took off.

"The airline industry has had problems beyond belief now, with theses high fuel prices and the economy slowing down, they certainly don't need help from errors in the financial markets. Today showed what a hair trigger investors are on," said Joe Schwieterman, DePaul University.

United stock closed Friday at $12.30 a share. Monday it dropped to $3 before trading was halted so United could clear up what proved to be a costly mistake.

How the old news report resurfaced is still unclear. It all began when a six-year-old Chicago Tribune news story about United filing for bankruptcy resurfaced on the web using Monday's date.

United Airlines believes the story came from the Tribune-owned South Florida Sun-Sentinel's website. The story was picked up by Bloomberg News Service.

"The reality is that we are in an information age and information comes out faster than knowledge," said Diane Swonk, Mesirow financial chief economist.

By mid-morning, United Airlines released a statement stating that bankruptcy rumors were completely untrue. The written statement added, "United has demanded a retraction from the Sun-Sentinel and is launching an investigation. United exited bankruptcy in February 2006."

The Tribune Company released a statement: "We have been informed that a 2002 Chicago Tribune news report about United Airlines' financial condition was picked up and circulated on the internet Monday morning. The story is not current. We are looking into the situation."

Experts say the fact that the media ran the story says a great deal about the precarious state of the airline industry.

"There is a lesson here, and that's that the amount of jitteriness in the airline industry is an all time high," said Schwieterman.

While UAL stock did rally at the end of the day, it did not fully recover. It closed at $10.92 a share, which was down by 11 percent.

While United is demanding a retraction from the Sun-Sentinel, the Chicago Tribune's website is reporting a different version of events. It says a reporter with an investment firm in Miami posted the article on Bloomberg after an online search of the Sun-Sentinel archives.


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