Inside The UAL Story Debacle

[Mike Scott]

At 10:53 a.m. Eastern Daylight Time Monday, a reporter at a Florida-based investor information service did a routine Google search and found a story saying United Airlines was declaring bankruptcy.

It seemed credible: It was from the Chicago Tribune and it was posted on the South Florida Sun-Sentinel, a sister paper also owned by Tribune. United Airlines parent company UAL (nasdaq: UAUA - news - people ), based in Chicago, has a long history of troubled finances.

He didn't call the company, but he did write up a headline, "United Airlines: Files for Ch. 11, to cut costs by 20%" and published it, not only to subscribers of the Income Securities Advisor, but also through Bloomberg terminals, to which ISA, in the parlance of the Internet news industry, aggregates its content.

Its impact on United's stock was swift and terrible. In the span of 10 minutes, 24 million shares changed hands. The stock, trading at $12.45, crashed to $3, according to Nasdaq. So severe was the market's response that Nasdaq halted trading from 11:06 a.m. to 12:30 p.m. The exchange says the rest of the day's trades will stand.

The problem, as most in the financial news industry and traders around the world now know, was that the story was six years old. The Chicago Tribune story ran Dec. 10, 2002, and appears to have been republished or resurfaced accidentally Sunday afternoon on the South Florida Sun-Sentinel's site.

How did it happen? That's a question of keen interest to United, its investors, regulators, and newsrooms struggling to deal with the exponential impact lightning-fast information delivery can have for both good and, in this case, very bad.

Of course this isn't the first such mistake that's punished an unsuspecting company. Just two weeks ago, Bloomberg published an obituary for Steve Jobs, Apple's (nasdaq: AAPL - news - people ) chief executive, in error. Jobs was still very much alive. Bloomberg noticed the error quickly and took the story down before it had a chance to roil Apple's stock.

UAL wasn't so lucky. Richard Lehmann, president of Income Securities Advisor, says his company aggregates news about distressed companies as an add-on subscription service for Bloomberg readers. Non-subscribers see a two-line summary of all of Lehmann's stories.

Minutes after the story was filed, Lehmann, a Forbes columnist, was alerted to a problem when non-subscribers jammed his switchboard with requests for the full text. "We're not in the business of providing fresh news," Lehmann says. "And consequently, we knew there was something wrong here." Lehmann said his employee was not negligent in picking up the Sun-Sentinel story because it had no date on it and appeared current beside new content tracking Hurricane Ike in the Southeastern U.S.

Bloomberg removed the story shortly after 11 a.m. Eastern and ran a follow-up at 11:06 a.m. Eastern, citing a United Airlines spokeswoman as saying the news was false. Lehmann's original text is no longer accessible. Bloomberg did not respond to calls for comment.

The situation touched off a scramble at the Chicago Tribune. When reached shortly after 11 a.m., Business Editor Micheal Lev said his staff was trying to figure out what was going on with United's stock. At the time, he knew nothing of the old Chicago Tribune story that had run in Florida. "We've written nothing on United Airlines today," said Lev.

Within a half hour of Lev's statements, Tribune (nyse: TRB - news - people ) had discovered the source of the story and contacted the Sun-Sentinel to take it down. "I literally just got word a couple minutes ago that there was problem," said Joe Schwerdt, deputy managing editor-interactive, at the time. He declined to discuss details about how his paper publishes stories on weekends. By 3:17 p.m. Monday, Schwerdt was quoted in a Chicago Tribune story saying that he still did not know what had happened.

In a statement, Tribune said the story was located in the archive section of the Sun Sentinel's site, and "contains information that would clearly lead a reader to the conclusion that it was related to events in 2002. In addition, the comments posted along with the story are dated 2002." Another potential tip-off: The URL of the story contains date information, a common tell for the Web-savvy about the true publication time of online material.

But the original publication date is nowhere to be found on the story. The only date listed anywhere on either the Chicago Tribune's version or on The Sun Sentinel's was today's--Sept. 8, 2008. This may have led to the mistake.

It seems the story may have resurfaced on either the business page or the home page of Sunsentinel.com at roughly 12:30 p.m. Eastern Daylight Time Sunday, according to SmartBrief.com, a Washington, D.C.-based news aggregator that automatically scrapes 500 to 1,000 news sites hourly, looking for information about numerous market sectors, including aviation.

A review of its database identified the original source of the story as the newspaper's front Web page or its front business page, says Chris McNeilly, vice president of technology at SmartBrief.com.

His system only picks up fresh headlines or so-called "related links" on the sites SmartBrief's software crawls--they don't even look at archives. Neither the front page nor the front business page of the Sun-Sentinel site displays related links.

While SmartBrief's Web site showed the Sun-Sentinel story today along with a time stamp, an e-mail newsletter the company edits for subscribers did not. The editor who prepares it around 5 a.m. decided the Sun-Sentinel story seemed fishy, and decided to keep it out.

"Technology gets you so far, but then our human editors make the final decisions for publication,” says McNeilly.

Beleaguered United Airlines reported a $2.7 billion loss for the June quarter. Like other major carriers, it is trying to navigate high fuel prices and a bumpy economy by cutting capacity out of the marketplace and squeezing more revenue from each seat.

It filed for Chapter 11 bankruptcy protection in December 2002 and emerged from it in 2006. Despite its struggles, the company has given no indication it plans another bankruptcy filing.

Earlier today, United said it was launching an investigation into the Sun-Sentinel story, calling the posting "irresponsible." United has demanded a retraction.


This was the posting on our internal Skynet web site.The following press release was issued on Monday by the company regarding a market rumor. The trading of UAUA stock was temporarily suspended on NASDAQ as the result of an erroneous press report. Trading resumed at approximately 11:30 a.m. Central time.
United Airlines today said reports that the company filed for bankruptcy are completely untrue and were caused by the irresponsible posting of a 6-year-old Chicago Tribune article by the Florida Sun Sentinel newspaper Web site with the date changed. The story was related to United’s 2002 bankruptcy filing, and United has demanded a retraction from the Sun Sentinel and plans an investigation. United exited bankruptcy in February 2006.

United continues to execute its previously announced business plan to successfully navigate through an environment marked by volatile fuel prices and continues to have strong liquidity.

PS The story produced some interesting ACARS traffic in addition to a lot of chatter on 123.45....oh well, we have been in this situation before.

MS

[Adam P.]

He didn't call the company, but he did write up a headline, "United Airlines: Files for Ch. 11, to cut costs by 20%" and published it,

Hmm. Surely your first move would be to check your sources?

And on a completely unrelated note,

some interesting ACARS traffic

Ohh Graaaaaahhhhaaaammmeee..... where aaaarrreeee youuuuu???????

[damien b]

We heard about this via the grapevine at work from Qantas staff (the crash in prices) before reading of the mistake today - it had many wondering why UA had again declared chapter 11 just 6 years after going chapter 11.

[Jason Carruthers]

Well I bet someone feels like a bit of a tool right about now




Jason

[Chris W]

I tracked the share price as the incident unfolded.



Would have been a fantastic buy at $3.

[D Chan]

Originally Posted by Chris W

I tracked the share price as the incident unfolded.



Would have been a fantastic buy at $3.

These sort of opportunities don't come too often! if anyone was brave enough to buy at the right time - wouldve become stinking rich in no time.

[Andrew M]

Yes, I was quite upset I wasn't at my computer when this event unfolded.

Would have happily found some spare cash to throw in at $4, would have nearly trippled my $ !

[Saj_A]

With OPEC cutting back production, I expect to see United as one of the first casualties of the game when oil prices head back toward triple-digits.