Ruling May Open Door To Bids For United

Mar 26, 2004
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CHICAGO, Jan. 8 - A federal bankruptcy court judge may have cracked open the door for bidders to be allowed to make offers for United Airlines, with a rare ruling last week against United and its pilots' union.

The judge, Eugene R. Wedoff of Federal Bankruptcy Court in Chicago, rejected a contract between United and its pilots' union on Friday. In doing so, he singled out a provision that would have required United's management to keep its right to draft a reorganization plan, or the contract would be nullified. He termed that requirement "inappropriate."

Potential bidders for United, a unit of UAL, have been held at bay during United's 25 months under protection because the management has maintained the exclusive right to file a reorganization plan. As long as that right remains in place, bidders cannot see the airline's confidential financial data or make competing offers without the airline's consent.

But if the judge lifted that right, called "exclusivity," other airlines or investment firms would be allowed to look at United's books and propose their own plans.

Among those mentioned has been the Texas Pacific Group, the investment company led by David Bonderman. In 2002, Texas Pacific made an offer for a controlling interest in US Airways, before being outbid by the Retirement Systems of Alabama.

Throughout the United bankruptcy case, Texas Pacific has held regular discussions with officials of the International Association of Machinists and Aerospace Workers, which represents United's baggage handlers and ramp workers, people close to the talks said this weekend.

But with United holding the sole right to draft a revamping plan, the talks have not been substantive, these people said. [A spokesman for Texas Pacific declined to comment on Sunday.]

United would still be able to draft its own plan if it lost exclusivity. But such an action could put pressure on management to wrap up its reorganization, and fast, legal experts said.

Judge Wedoff has granted more than a half-dozen requests by United to extend its exclusivity, but generally for 30 days at a time, not the longer extensions United has sought.

In August, Judge Wedoff overruled objections from United's unions, which challenged United's exclusivity after the company stopped making its required contributions to employees' pension funds and said that it might terminate the plans.

But in his ruling Friday, the judge gave the first indication that his leniency might have its limits.

The judge objected to a little-noticed stipulation that United's management team, led by its chief executive, Glenn F. Tilton, retain its exclusivity, or the contract would not remain in effect.

Any decision on granting exclusivity rests solely with the judge, meaning the pilots and the airline were treading on Judge Wedoff's turf.

The clause "is an incentive against the termination of exclusivity," Judge Wedoff said.

United had described the contract as “fair and equitable. On Sunday, a United spokeswoman, Jean Medina said the clause “speaks to the quality of our management team and the strength of our business plan.â€￾

United's exclusivity, he continued, "should be decided on its merits. An incentive of this sort is inappropriate," the judge said, to a hushed courtroom.

United said it considered the contract to be "fair and equitable."

The airline said it planned to resume talks soon on a new contract, although the pilots' union warned that a deal could not be assured.

Separately, the airline reached a tentative agreement late Saturday with its flight attendants' union. The flight attendants had threatened to strike United if their labor agreement were set aside by the bankruptcy court and concessions were imposed.

The outcome of any battle over exclusivity would be heavily influenced by United's creditors' committee. It has not challenged the company's requests for exclusivity, and had not fought the airline in any remarkable way until the pilots' contract, which it opposed along with unions, some banks and a federal pension agency.

A change of heart by the creditors on exclusivity would undoubtedly get the attention of the judge and potential bidders, not to mention United. The committee’s lead lawyer, Fruman Jacobson, said Sunday the committee would weight the impact of any request according to the result it might have on United.

The issue could come up soon because of the impact on United's revenue from the decision last week by Delta Air Lines to reduce fares by up to 50 percent and limit what it charges in coach and first class.

An estimate by Merrill Lynch placed the cost to United of the Delta fare cuts at $500 million. That could lead to more cuts by United, forcing it again to revise the business plan on which it is basing its restructuring efforts.

Robert D. Roach, vice president of transportation for the machinists' union, warned of that prospect a few weeks ago, before Delta's move, and argued that investors should be allowed to look at the airline. "We need equity investors to come in, sit down with management and labor, and provide some ideas. Not somebody that just waves a piece of paper that is good for the next three months," he said.

http://www.nytimes.com/2005/01/10/business...print&position=
 
I hate to say this but all of the work groups from every major airline should have stuck together over the last year and tried to do something to stop this insanity. The airline industry is going down the tubes and all that will be left is the low cost carriers calling the "cattle" for boarding. This has been a sad year for the legacy carriers, particularly UA and US and it is not going to stop there. I think it is too late for US but good luck to all at UA!
 
bobcat said:
I hate to say this but all of the work groups from every major airline should have stuck together over the last year and tried to do something to stop this insanity. The airline industry is going down the tubes and all that will be left is the low cost carriers calling the "cattle" for boarding. This has been a sad year for the legacy carriers, particularly UA and US and it is not going to stop there. I think it is too late for US but good luck to all at UA!
[post="237540"][/post]​

Dont be suprised if there still is a UAIR/UAL merger/emergence out of chapter 11 . Ual is mirroring all the labor moves UAIR has been making and by FEB UAL's domestic route structure will have been reduced by 41% since pre 9/11 levels. It may be the only way for the two to survive and definetly for one to survive.
 
I agree with you LGA/037. Look what happened when Kmart emerged from bankruptcy. Who would ever have believed they would be in a position to takeover Sears in a merger of the two companies.

I think Judge Wedoff is actually a pretty decent Judge so far. UA's lawyers have mistakenly become overconfident in their belief that the company's restructuring efforts will always be rubber stamped by the Judge. This Judge has a huge responsibility on his shoulders. The restructuring of United Airlines if allowed in its present form of dumping the pensions onto the PBGC will have an tremendous negative impact on the economy for years to come. Perhaps the Judge should order the ATSB to reconsider United's loan application instead. Perhaps Congress needs to act on new ways to stabilize the industry for the short term and then study more permanent changes in the tax and transportation laws.
 
LGA / 037 said:
Dont be suprised if there still is a UAIR/UAL merger/emergence out of chapter 11 . Ual is mirroring all the labor moves UAIR has been making and by FEB UAL's domestic route structure will have been reduced by 41% since pre 9/11 levels. It may be the only way for the two to survive and definetly for one to survive.
[post="237590"][/post]​

As I have previously posted, I believe this is a possibility. If this happens, we will never hear the end of it from USA320Pilot.
 
aafsc said:
As I have previously posted, I believe this is a possibility. If this happens, we will never hear the end of it from USA320Pilot.
[post="237842"][/post]​
<_< aafsc, doesn't that "aa" in your handel stand for american airlines? What's with this "we" Bull Sh@#$t???? :down:
 
MCI transplant said:
<_< aafsc, doesn't that "aa" in your handel stand for american airlines? What's with this "we" Bull Sh@#$t???? :down:
[post="237847"][/post]​

The "we" refers to all who read these boards.
 
novaqt said:
UA's lawyers have mistakenly become overconfident in their belief that the company's restructuring efforts will always be rubber stamped by the Judge.
[post="237604"][/post]​

Man ain't that the truth. They even went so far as to write their own 'exclusivity' into the pilot's agreement. I think that's what really pissed off the judge and then suddenly, within a matter of hours, the company was bending over backwards in order to ensure that they didn't have to go in front of him again. Such a shame as I know how much they were sooo looking forward to putting on their elaborate, multi-witness, 'Perfect Storm' dog and pony show.

So now we're gonna have 90 days to hash out the pension issues eh? Well with all that's happened lately I've come down with a serious case of me-too-itis. I would hope that we all make it perfectly clear that if ANY pension goes, they ALL go and that should include Glenn and Doug and Jake and all the rest of them.

Shared pain, isn't that his favorite moniker?
 
bobcat said:
I hate to say this but all of the work groups from every major airline should have stuck together over the last year and tried to do something to stop this insanity. The airline industry is going down the tubes and all that will be left is the low cost carriers calling the "cattle" for boarding. This has been a sad year for the legacy carriers, particularly UA and US and it is not going to stop there. I think it is too late for US but good luck to all at UA!
[post="237540"][/post]​

WHAT! You should rethink this stement I do believe that UA is in much tougher spot than US......
 
Especially now since the Gov't and GE have allowed US to tap their money into the summer months.
 
novaqt said:
I agree with you LGA/037. Look what happened when Kmart emerged from bankruptcy. Who would ever have believed they would be in a position to takeover Sears in a merger of the two companies.
[post="237604"][/post]​

Not really a good parallel. KMart got its financial house in order and started making a profit--thus the funds available to purchase Sears. Neither UAL nor U are predicting a profit anytime soon, even with these horrific concessions.
 

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