US and it business partner UA''s reorganization timelines

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chipmunn

Guest

[P align=left][FONT face=Times New Roman size=3]US Airways Restructuring Timeline[BR][/FONT]
[FONT face=Times New Roman size=3][BR]November 26 – Management - Labor Coalition Meeting[BR][/FONT][FONT face=Times New Roman size=3][BR]December 3 – Management deadline for unions to approve contract modifications, which could include productivity/retirement changes, and in case of ALPA additional RJ relief. The RJ relief could include an acceptable Freedom Air accord, authorization for current wholly owned airlines to fly 70-seat RJs with J4J.[BR][/FONT][FONT face=Times New Roman size=3][BR]December 5 – US Airways Board of Directors meeting to decide bankruptcy direction[BR][/FONT][FONT face=Times New Roman size=3][BR]December 9 – US Airways deadline to file its Plan of Reorganization with the bankruptcy court[BR][/FONT][FONT face=Times New Roman size=3][BR]December 12 – Fourth bankruptcy Omnibus Hearing[BR][/FONT][FONT face=Times New Roman size=3][BR]January 16 – Fifth bankruptcy Omnibus Hearing[BR][/FONT][FONT face=Times New Roman size=3][BR]February – Target for confirmation hearing[BR][/FONT][BR][FONT face=Times New Roman size=3]United Airlines Restructuring Timeline[/FONT][BR][BR][FONT face=Times New Roman size=3]November 27 - IAM Tentative Agreement Vote Count[BR][/FONT][FONT face=Times New Roman size=3][BR]November 30 - AFA Tentative Agreement Vote Count[BR][/FONT][FONT face=Times New Roman size=3][BR]December 2 - $375 million public debt payment[BR][/FONT][FONT face=Times New Roman size=3][BR]December 16 – Technical default grace period deadline[BR][/FONT][FONT face=Times New Roman size=3][BR]If United is unable to make or extend the December 2 payment and has not received at least provisional approval from the ATSB for the loan guarantee, the airline has said it may file for bankruptcy protection. But, the company has said December 2 is not a firm deadline for a decision on whether it will file for a formal reorganization; however, its options include making the payment, filing for bankruptcy protection, or not paying the debt. If the public debt is not paid the airline would be in technical default and have a 10-day business day cure period that expires on December 16. At the end of the cure period, if the United still has not paid the debt or filed for court protection, the company would be in legal default and could face a creditor involuntary bankruptcy filing, which I consider to risky and thus the airline would likely file a bankruptcy petition.[BR][/FONT][FONT face=Times New Roman size=3][BR]The ATSB has not told United when it will decide on the airline’s application, but CEO Glenn Tilton predicted a decision will come in the next couple of weeks.[BR][/FONT][FONT face=Times New Roman size=3][BR]According to Aviation Daily, the federal loan guarantee appears to be the airline’s last hope for funds. While United once talked about a possible separate, outside financing source, Tilton said yesterday that’s not on the radar screen now. In addition, all of United’s labor accords are dependent on obtaining the loan guarantee and without the government backed aid; the new labor accords will not provide bankruptcy S.1113 protection. [BR][BR]Chip[/FONT][/P]
 

PHenry

Newbie
Nov 22, 2002
5
0
Chip, do not call it a labor coalition meeting, there is no active labor coalition at US Airways, it is every union for themselves as alpa proved when they signed on managament's healthcare proposal instead of the one the IAM found which was better coverage for less money. No labor coalition would make someone who makes $40,000 and less pay the same for health care for a pilot who makes $80,000 to $200,000 plus.

And where is the press release on the so called meeting? Or is it one of your facts again?

[FONT face=Times New Roman size=3][EM]. In addition, all of United’s labor accords are dependent on obtaining the loan guarantee and without the government backed aid; the new labor accords will not provide bankruptcy S.1113 protection.[/EM]
[/FONT]Chip


[A href=http://www.iam141m.org/141MSummaryB.PDF]http://www.iam141m.org/141MSummaryB.PDF[/A]

Paragraph 8: In the event of a bankruptcy filing, the Company agrees not to seek rejection of the District 141M collective bargaining agreements under Section 1113 of 1114 of the Bankruptcy code unless specified events occur which threaten the Company's solvency.

[A href=http://www.iam141.org/ual_recovery_2.htm]http://www.iam141.org/ual_recovery_2.htm[/A]

[SPAN style=FONT-SIZE: 12pt; FONT-FAMILY: 'Times New Roman'; mso-fareast-font-family: 'Times New Roman'; mso-ansi-language: EN-US; mso-fareast-language: EN-US; mso-bidi-language: AR-SA][FONT color=#000000]8. Bankruptcy Letter:


[P class=MsoNormal style=MARGIN: 0in 0in 0pt][FONT size=3][FONT color=#000000][FONT face=Times New Roman]In the event of a bankruptcy filing, the Company agrees not to seek a rejection of the District 141 collective bargaining agreements under Section 1113 or 1114 of the Bankruptcy Code unless specified events occur which threaten the Company’s solvency.
[?xml:namespace prefix = o ns = urn:schemas-microsoft-com:eek:ffice:eek:ffice /][o:p]
[/o:p][/FONT][/FONT][/FONT][/FONT][/SPAN][/P]
 

Bear96

Veteran
Aug 20, 2002
2,926
122
[blockquote]
----------------
On 11/23/2002 12:08:05 AM chipmunn wrote:

...In addition, all of United's labor accords are dependent on obtaining the loan guarantee and without the government backed aid; the new labor accords will not provide bankruptcy S.1113 protection.

Chip
----------------
[/blockquote]

Not accurate. (At least I don't think it is; you seem to have a punctuation error here so I may be misunderstanding you.)

The AFA/UAL TA has a S.1113 bankruptcy protection sideletter of agreement. I believe the other UAL agreements do as well.

Of course without the ATSB guarantee the TA becomes null and void in which case we would revert to our current agreement which does NOT have bankruptcy protection, but you mentioned the new agreements so I took that to mean the TA we are now voting on. Your misplaced semicolon is confusing.
 

mwa

Advanced
Aug 20, 2002
190
8
Chip - I have said it before - Do not let Ornstein in the door at U.
You should be doing everything in your power to alert the troops that this is another Lorenzo takeover fiasco in the making. Please stop rubberstamping this Management coup before it is too late.
 

PHenry

Newbie
Nov 22, 2002
5
0
Can anyone find the word[STRONG][FONT style=BACKGROUND-COLOR: #ffff00] LIMITED [/FONT][/STRONG]in either of the restructuring agreements as Chip has?[BR][BR][A href=http://www.iam141m.org/141MSummaryB.PDF][FONT color=#336699]http://www.iam141m.org/141MSummaryB.PDF[/FONT][/A][BR][BR]Paragraph 8: In the event of a bankruptcy filing, the Company agrees not to seek rejection of the District 141M collective bargaining agreements under Section 1113 of 1114 of the Bankruptcy code unless specified events occur which threaten the Company's solvency.[BR][BR][A href=http://www.iam141.org/ual_recovery_2.htm][FONT color=#336699]http://www.iam141.org/ual_recovery_2.htm[/FONT][/A][BR][BR][SPAN style=FONT-SIZE: 12pt; FONT-FAMILY: 'Times New Roman'; mso-fareast-font-family: 'Times New Roman'; mso-ansi-language: EN-US; mso-fareast-language: EN-US; mso-bidi-language: AR-SA][FONT color=#000000]8. Bankruptcy Letter: [BR][BR][BR][BR]
[P class=MsoNormal style=MARGIN: 0in 0in 0pt][FONT size=3][FONT color=#000000][FONT face=Times New Roman]In the event of a bankruptcy filing, the Company agrees not to seek a rejection of the District 141 collective bargaining agreements under Section 1113 or 1114 of the Bankruptcy Code unless specified events occur which threaten the Company’s solvency.[/FONT][/FONT][/FONT][/FONT][/SPAN][BR]Do you not learn?[BR][BR]Since 1983 when 1113 was enacted no court has ever abrogated one, AMR tired in its purchase of TWA just last year and the courts said no.[BR][BR]Chip I will believe her over you anyday[BR][BR][BR]
[P class=MsoNormal dir=ltr style=MARGIN: 0in 0in 0pt; TEXT-ALIGN: center align=left][STRONG][SPAN lang=EN style=mso-ansi-language: EN][FONT size=3][FONT color=#000000]Presented by[?xml:namespace prefix = o ns = urn:schemas-microsoft-com:eek:ffice:eek:ffice /][o:p][/o:p][/FONT][/FONT][/SPAN][SPAN lang=EN style=FONT-SIZE: 11pt; COLOR: black; FONT-FAMILY: Tahoma; mso-fareast-font-family: 'Times New Roman'; mso-ansi-language: EN; mso-fareast-language: EN-US; mso-bidi-language: AR-SA; mso-font-kerning: 14.0pt]Sharon L. Levine, Esq. Of [/SPAN][SPAN lang=EN style=FONT-SIZE: 11pt; COLOR: black; FONT-FAMILY: Tahoma; mso-fareast-font-family: 'Times New Roman'; mso-ansi-language: EN; mso-fareast-language: EN-US; mso-bidi-language: AR-SA; mso-font-kerning: 1.0pt]Lowenstein Sandler PC[/SPAN][SPAN lang=EN style=FONT-SIZE: 11pt; COLOR: black; FONT-FAMILY: Tahoma; mso-fareast-font-family: 'Times New Roman'; mso-ansi-language: EN; mso-fareast-language: EN-US; mso-bidi-language: AR-SA; mso-font-kerning: 14.0pt] [BR][BR] [/SPAN][/STRONG][SPAN lang=EN style=FONT-SIZE: 11pt; COLOR: black; FONT-FAMILY: Tahoma; mso-fareast-font-family: 'Times New Roman'; mso-ansi-language: EN; mso-fareast-language: EN-US; mso-bidi-language: AR-SA; mso-font-kerning: 14.0pt]Levine started her presentation with an overview of bankruptcy.[SPAN style=mso-spacerun: yes] [/SPAN]The main goal of bankruptcy is to relieve a debtor of debts, thereby providing an opportunity for a fresh start.[SPAN style=mso-spacerun: yes] [/SPAN]Bankruptcy also benefits creditors by providing a forum for an orderly liquidation of a debtor’s estate or a judicially scrutinized plan for full or partial repayment of creditor, and protecting unsecured creditors from preferential or fraudulent transfers of the debtor’s property and requiring adequate protection of secured creditor’s collateral[/SPAN] [BR][BR][/P]
[P class=MsoNormal style=MARGIN: 0in 0in 0pt align=left][SPAN lang=EN style=mso-ansi-language: EN][FONT size=3][FONT color=#000000]Levine also went over all the procedures and steps in the bankruptcy codes.[SPAN style=mso-spacerun: yes] [BR][/SPAN]One item she covered in depth is the 1113 letter, which refers to the section of code that ensures that a company negotiates with the union before they seek abrogation of the labor agreement.[SPAN style=mso-spacerun: yes] [/SPAN]When a company seeks protection, the agreement remains in effect.[SPAN style=mso-spacerun: yes] [/SPAN]When a union negotiates an 1113 letter it secures an agreement with the company showing that the company will not seek further cuts from labor.[SPAN style=mso-spacerun: yes] [/SPAN]To this date, no company that has had an 1113 letter negotiated has ever had one abrogated by the court it. (meaning the court has said no)[/FONT][/FONT][/SPAN][BR][SPAN lang=EN style=mso-ansi-language: EN][FONT size=3][FONT color=#000000][o:p][/o:p][/FONT][/FONT][/SPAN][BR][/P]
[P class=MsoNormal style=MARGIN: 0in 0in 0pt][BR][BR]
[P class=MsoNormal style=MARGIN: 0in 0in 0pt][SPAN lang=EN style=mso-ansi-language: EN][FONT size=3][FONT color=#000000]Companies that request abrogation of the labor agreement but it must meet the following nine (9) distinct requirements:[/FONT][/FONT][/SPAN][BR]
[P class=MsoNormal style=MARGIN: 0in 0in 0pt 1in; TEXT-INDENT: -0.25in; mso-list: l0 level1 lfo1; tab-stops: list 1.0in][FONT color=#000000][SPAN lang=EN style=mso-ansi-language: EN][FONT size=3]1.[/FONT][SPAN style=FONT: 7pt 'Times New Roman'] [/SPAN][/SPAN][SPAN lang=EN style=mso-ansi-language: EN][FONT size=3]The debtor in possession must have made a proposal to the union.[o:p][/o:p][/FONT][/SPAN][/FONT][BR][BR]
[P class=MsoNormal style=MARGIN: 0in 0in 0pt 1in; TEXT-INDENT: -0.25in; mso-list: l0 level1 lfo1; tab-stops: list 1.0in][FONT color=#000000][SPAN lang=EN style=mso-ansi-language: EN][FONT size=3]2.[/FONT][SPAN style=FONT: 7pt 'Times New Roman'] [/SPAN][/SPAN][SPAN lang=EN style=mso-ansi-language: EN][FONT size=3]The proposal must be based upon the most complete and reliable information available at the time of the proposal.[o:p][/o:p][/FONT][/SPAN][/FONT][BR][BR]
[P class=MsoNormal style=MARGIN: 0in 0in 0pt 1in; TEXT-INDENT: -0.25in; mso-list: l0 level1 lfo1; tab-stops: list 1.0in][FONT color=#000000][SPAN lang=EN style=mso-ansi-language: EN][FONT size=3]3.[/FONT][SPAN style=FONT: 7pt 'Times New Roman'] [/SPAN][/SPAN][SPAN lang=EN style=mso-ansi-language: EN][FONT size=3]The modification must be necessary to permit reorganization.[o:p][/o:p][/FONT][/SPAN][/FONT][BR][BR]
[P class=MsoNormal style=MARGIN: 0in 0in 0pt 1in; TEXT-INDENT: -0.25in; mso-list: l0 level1 lfo1; tab-stops: list 1.0in][FONT color=#000000][SPAN lang=EN style=mso-ansi-language: EN][FONT size=3]4.[/FONT][SPAN style=FONT: 7pt 'Times New Roman'] [/SPAN][/SPAN][SPAN lang=EN style=mso-ansi-language: EN][FONT size=3]The modification must provide that all affected parties be treated fairly and equitably.[o:p][/o:p][/FONT][/SPAN][/FONT][BR][BR]
[P class=MsoNormal style=MARGIN: 0in 0in 0pt 1in; TEXT-INDENT: -0.25in; mso-list: l0 level1 lfo1; tab-stops: list 1.0in][FONT color=#000000][SPAN lang=EN style=mso-ansi-language: EN][FONT size=3]5.[/FONT][SPAN style=FONT: 7pt 'Times New Roman'] [/SPAN][/SPAN][SPAN lang=EN style=mso-ansi-language: EN][FONT size=3]The debtor must provide the union with such relevant information as is necessary to evaluate the proposal.[o:p][/o:p][/FONT][/SPAN][/FONT][BR][BR]
[P class=MsoNormal style=MARGIN: 0in 0in 0pt 1in; TEXT-INDENT: -0.25in; mso-list: l0 level1 lfo1; tab-stops: list 1.0in][FONT color=#000000][SPAN lang=EN style=mso-ansi-language: EN][FONT size=3]6.[/FONT][SPAN style=FONT: 7pt 'Times New Roman'] [/SPAN][/SPAN][SPAN lang=EN style=mso-ansi-language: EN][FONT size=3]The debtor must have met with the collective bargaining representative at the reasonable times subsequent to making the proposal.[o:p][/o:p][/FONT][/SPAN][/FONT][BR][BR]
[P class=MsoNormal style=MARGIN: 0in 0in 0pt 1in; TEXT-INDENT: -0.25in; mso-list: l0 level1 lfo1; tab-stops: list 1.0in][FONT color=#000000][SPAN lang=EN style=mso-ansi-language: EN][FONT size=3]7.[/FONT][SPAN style=FONT: 7pt 'Times New Roman'] [/SPAN][/SPAN][SPAN lang=EN style=mso-ansi-language: EN][FONT size=3]The debtor must have negotiated with the union concerning the proposal in good faith.[o:p][/o:p][/FONT][/SPAN][/FONT][BR][BR]
[P class=MsoNormal style=MARGIN: 0in 0in 0pt 1in; TEXT-INDENT: -0.25in; mso-list: l0 level1 lfo1; tab-stops: list 1.0in][FONT color=#000000][SPAN lang=EN style=mso-ansi-language: EN][FONT size=3]8.[/FONT][SPAN style=FONT: 7pt 'Times New Roman'] [/SPAN][/SPAN][SPAN lang=EN style=mso-ansi-language: EN][FONT size=3]The union must have refused to accept the proposal with good cause.[o:p][/o:p][/FONT][/SPAN][/FONT][BR][BR]
[P class=MsoNormal style=MARGIN: 0in 0in 0pt 1in; TEXT-INDENT: -0.25in; mso-list: l0 level1 lfo1; tab-stops: list 1.0in][FONT color=#000000][SPAN lang=EN style=mso-ansi-language: EN][FONT size=3]9.[/FONT][SPAN style=FONT: 7pt 'Times New Roman'] [/SPAN][/SPAN][SPAN lang=EN style=mso-ansi-language: EN][FONT size=3]The balance of the equities must clearly favor rejection of the agreement.[/FONT][/SPAN][/FONT]
[P class=MsoNormal style=MARGIN: 0in 0in 0pt; TEXT-INDENT: -0.25in; TEXT-ALIGN: center align=center][SPAN lang=EN style=mso-ansi-language: EN][FONT size=3][FONT color=#000000][BR]Levine also noted that bankruptcy is not the preferred course for your contract.[o:p][/o:p][/FONT][/FONT][/SPAN][BR][BR]
[P class=MsoNormal style=MARGIN: 0in 0in 0pt; TEXT-INDENT: -0.25in; TEXT-ALIGN: center align=center]
[P class=MsoNormal style=MARGIN: 0in 0in 0pt; TEXT-INDENT: -0.25in][SPAN lang=EN style=mso-ansi-language: EN][FONT size=3][FONT color=#000000]HerHer presentation was excellent.[/FONT][/FONT][/SPAN][/P]
 
OP
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chipmunn

Guest
[P][FONT face=Times New Roman size=3]UA labor agreements provide limited bankruptcy protection per the individual term sheets. Specifically, reports indicate the TA's state, In the event of a bankruptcy filing, the Company agrees not to seek a rejection of the collective bargaining agreements under Section 1113 or 1114 of the Bankruptcy Code unless specified events occur which threaten the Company's solvency.[BR][/FONT][FONT face=Times New Roman size=3][BR]For an example of this clause click onto:[BR][/FONT][FONT face=Times New Roman size=3][BR][A href=http://www.iam141m.org/141MSummaryB.PDF]http://www.iam141m.org/141MSummaryB.PDF[/A][BR][/FONT][FONT face=Times New Roman size=3][BR]US has provided each union a S.1113 letter; however, according to the ALPA November 23 code-a-phone, Management has requested a meeting with all US Airways labor leaders on Tuesday, November 26, to update labor on the Company’s status and to present management’s ideas on potential solutions to the current problems the Company is facing. The recorded message also said, The Retirement and Insurance Committee also briefed the MEC on management’s meeting with the PBGC. [BR][/FONT][FONT face=Times New Roman size=3][BR]Reports indicate this meeting will discuss further concessions, likely to include productivity changes and retirement changes for ALPA, AFA, and IAM represented employees. Management has told union representatives labor will have one week to reach new accords.[BR][/FONT][FONT face=Times New Roman size=3][BR]In my opinion, without acceptable labor agreements, which would qualify the company for the loan guarantee, management could have two choices: Seek to change union contracts through the bankruptcy court or fragment then liquidate the airline.[BR][/FONT][FONT face=Times New Roman size=3][BR]Even though management has agreed to S.1113 protection, legal sources believe the company could seek relief if the company's viability is threatened. Another words, either the court authorizes contract changes or the judge could order a liquidation of the airline. I believe it would be better to reach consensual accords instead of having them imposed or the company liquidated. Considering the judge has agreed to every company motion, if this is used as a benchmark the question becomes how will the court rule if the management seeks relief from the restructuring agreements?[BR][/FONT][FONT face=Times New Roman size=3][BR]Chip[/FONT][/P]
 

767jetz

Veteran
Aug 20, 2002
3,286
2,779
PHenry,

I believe the limited 1113 protection Chip refers to was in the UA ALPA's Term Sheet, which is a summary of our ERP II. The word LIMITED is not used in the actual language of the contract, however the (ALPA) contract is contingent on several things. One is ratification of agreements from all other employee groups. The other is approval of the ATSB guarantee. So it can be assumed that the word LIMITED in the Term Sheet refers to the fact that it is limited to the agreement going into effect. No agreement, no 1113 protection.

Additionally, even if the ERP passes, loan guarantees are approved, and the 1113 protection is in effect, the company may still come back to employees for more if another terrorist attack or a war significantly affects the economy. This can also be interpreted as LIMITED. Chip's seems to think that LIMITED means that UA's 1113 protection is somehow different and less than US ALPA's 1113 protection. As is usually the case with Chip's post, it all depends on how you interpret the words. It is once again misleading, vague, and confusing. It's like Clinton debating the meaning of the word IS. What exactly is the meaning of the word LIMITED? And remember that the word only shows up in the Term Sheet, not the actual ERP language. So each of us can come up with our own meaning. When reading Chip's comments, my advice is to always keep in mind the source.
 

767jetz

Veteran
Aug 20, 2002
3,286
2,779
Chip writes:

If the public debt is not paid the airline would be in technical default and have a 10-day business day cure period that expires on December 16. At the end of the cure period, if the United still has not paid the debt or filed for court protection, the company would be in legal default and could face a creditor involuntary bankruptcy filing,...

According to Aviation Daily, the federal loan guarantee appears to be the airline’s last hope for funds. While United once talked about a possible separate, outside financing source, Tilton said yesterday that’s not on the radar screen now.



Chip,

Well here is some additional info from The New York Times:

A coalition of European, Japanese and American lenders who hold leases on United's planes could reach a deal with the airline as early as next week, which might help the airline win key federal loan guarantees, the Times said.
United, the No. 2 U.S. airline, has been struggling to secure federal loan guarantees of $1.8 billion to cover a private sector loan of up to $2 billion.
United also faces a Dec. 2 deadline for repaying $375 million in loans backed by its aircraft, the Times said.
The refinancing could yield as much as $100 million to $150 million in cash for the airline, one person involved in the negotiations told the Times.
Separately, the Wall Street Journal reported Glenn Tilton, chairman and chief executive of United parent UAL Corp. , as saying he has some commitment from unnamed airlines in the Star Alliance group to provide the company with as much as $200 million in loans.
Tilton was speaking at a Star Alliance meeting in Rio do Janeiro, the Journal said.

$150 M plus another $200 M = $350 Million. I would say this might help UA pay the $375 M debt due in December. Don't you? This is another reason you simply can't keep making a straight comparison between UA to US. UA has among it's resources, partners in the STAR Alliance willing to lend a helping hand. US does not.

PS. Looks like different sources have different info, eh?
 
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chipmunn

Guest
767jetz:

I do not like the financial situation that either US or UA find them self in. Plan and simple it sucks, but I try to provide information that is 100 percent accurate and balanced.

I firmly believe the business opportunity that presented itself in 1995 and 2000 (September 11 not withstanding) would have prevented the current crisis; however, today's story in the New York Times, presented below, provides an accurate account of what I have been alluding to on this message board.

As one leading airline observer told me today, This is getting interesting, but I believe UAL is heading down a very bad path. If ATSB rejects them (instead of some form of conditional approval), they are in big trouble and liquidation probabilities would rise dramatically.

In my opinion, the UA labor cuts are insufficient to obtain the loan guarantee; however, that does not mean the board will deny the application. UA has a very powerful congressional delegation, who convinced the Bush Administration to approve the previous merger, which is now lead by Dennis Hastert who is strongly lobbying the Bush Administration to approve the loan guarantee. But, the entire industry and their congressional delegations are lobbying the board to disapprove UA's application, as a means to remove excess industry capacity to restore pricing power.

Again, I wish you no harm and I am hopeful UA and US survive this mess because our futures are now dependent upon one another.

Here's the New York Times story:

United Tilts With Rivals on Adequacy of Loan Aid

NEW YORK (New York Times) - With the fate of United Airlines before a federal loan guarantee board, competitors of the company are challenging whether the $5.8 billion in lower wages and other concessions United says it has extracted from its employees are enough to keep the airline afloat, even with the government-backed loans.

But the company and its unions rebutted that notion yesterday, saying employees were making sacrifices that would be immediately felt and would help the airline become more competitive.

The effort by United's competitors illustrates the highly risky game that is being played out as United maneuvers to avoid a Chapter 11 bankruptcy filing and win $1.8 billion in loan guarantees from the federal panel, the Air Transportation Stabilization Board.

UAL, the parent company of United Airlines, is facing a critical week. On Wednesday, the machinists vote on a tentative deal that would grant $1.5 billion in concessions. In the meantime, a $375 million payment on loans backed by aircraft is scheduled on Dec. 2. If UAL cannot make or extend the payment, and does not soon receive the loan guarantees, it will be forced to seek bankruptcy court protection from creditors.

Competitors are circulating analyses in Washington that take apart United's latest deals with its pilots, flight attendants and machinists, arguing that in some cases United will be paying its employees more than it did at the beginning of the year, even with the cutbacks.

Over the weekend, officials from United and the unions took strong exception to the analyses — some of which have been sent by the airline's competitors to Congress, the Bush administration and the loan guarantee board in hopes of dissuading the board from approving the loans. United's side says the documents are incorrect and mischaracterize the airline's cost structure. We have been stunned at how far other carriers are willing to go to sabotage United's application, said Paul Whiteford, chairman of the pilots' union at United. We invite anyone who doubts the extraordinary employee sacrifices at United to spend an afternoon with a group of our pilots.

For months, United's competitors, including Delta and Continental, have argued that the government should not prop up an airline they say was poorly managed before the September 2001 attacks.

An analysis by one competitor that is making the rounds on Capitol Hill contends that labor costs for United's pilots will in fact rise 16 percent over the next six years because pension costs more than offset the savings from the wage concessions. The analysis argued further that when compared with what pilots earned in October 2000, before their most recent contract, hourly rates are as much as 17.7 percent higher even after the concessions, based on the type of aircraft each pilot flies.

Both the union, the Air Line Pilots Association, and the company disagreed strongly with these calculations, saying that even including pension costs, the airline's total labor expense would drop.

And officials of the pilots said that pension expenses would still rise even if pilots accepted far sharper pay cuts, because assumptions about pension expenses are made years in advance of when retirees are paid.

Moreover, they said, United plans to retire many of its largest planes, the Boeing 747-400's, for which pilots are paid the most to fly — meaning that average hourly rates will drop sharply once that occurs.

Another competitor of United's, in documents submitted to the loan guarantee board, argues that the airline's high-cost contracts with its ramp agents and machinists are to blame for its costs, not the impact of terrorist acts, as United has argued.

United's current financial condition is largely the result of its labor agreements, which saddled United with high labor costs — not the Sept. 11 terrorist attacks, the analysis said.

Frederic F. Brace III, UAL's chief financial officer, acknowledged that the airline had based its previous labor contracts, negotiated in 2000, on the assumption that business travel would remain strong. But he said in an interview yesterday that United's revenue had dropped precipitously in the past year, from an annual rate of about $18 billion before the attacks, to about $13 billion now, and that the attacks had hurt the airline far more than its labor contracts.

A competitor's analysis also contended that a contract provision calling for ramp agents and machinists to be paid $498 million, plus interest, in retroactive pay over the next two years will drain $65 million a quarter for the next eight quarters. It adds, 25 percent of United's loan guarantee request would go to fund retroactive pay increases to just one group of United employees, not to improve United's financial or operational condition.

But the International Association of Machinists, representing mechanics and other ground workers, said the raises were promised by United to employees who had worked since 1994 without a pay raise. Joe Tiberi, a spokesman for the union, termed the analysis ridiculous, adding, The concessions are real.

Mr. Brace noted that the loss of four days a year in vacation, which the machinists promised to give the airline under their concessions agreement, means that the pay cuts of 6 to 7 percent, depending on job classification, actually yield a savings to the airline of 8 to 9 percent. The pay cuts begin to be restored at the end of 2004. Mr. Brace offered to pledge to put the loan guarantees into a separate fund that would not be used for these increases.

Mr. Brace said he was distressed at the level of rancor that had developed between United and its competitors over the company's application for loan guarantees.

I don't have any problem with anyone expressing their opinion, Mr. Brace said. But when they try to spin data, I think it's over the edge.

Mr. Brace said that when wages and benefits are taken into account, United's pilots earn less than their counterparts at some leading airlines and that its machinists' compensation rates are among the industry's lowest.

The comparison that they are making and the implication they are trying to project is one that in our case the facts don't support, he said.
 

UAL777flyer

Veteran
Aug 20, 2002
730
0
I'm kind of curious why UA's labor concession deals are null/void if UA does not obtain ATSB loan guarantee approval. The only other alternative for UA would then be bankruptcy. And certainly, under those conditions, the least UA would need would be those very cuts agreed to in the concessionary T/A's. But by being null/void, isn't UA then able to petition for changes because the S.1113 side letters would no longer be in affect because the company would be going off the current contracts? So then doesn't that force the unions to go back and negotiate for new T/A's? And if so, the company than has a heck of a lot more leverage because of being in bankruptcy. Maybe I'm not interpreting this clearly (and if I'm not, someone please point it out), but it seems to me that the UA unions would have been better served to have these concessionary agreements go into affect regardless of the ATSB outcome and then include S.1113 letters of protection. That, at least to me, would seem to afford them the greatest protection.

Comments?
 

usfliboi

Veteran
Aug 20, 2002
2,070
270
Whatever happens at ual is their buisness. We have our own issues and people have enough of a time dealing with our own. We already know all airlines are hurting. Im not concerned nor do i need to constantly be reminded of uals woes. Their our limited partner now but so was amr an ba. This topic should be on ual board....
 

767jetz

Veteran
Aug 20, 2002
3,286
2,779
UAL777flyer,

My only thought on that is that the S.1113 letter may be a separate side letter. I also questioned the point of having BK protection that only goes into effect if the ATSB loan is approved.
 

avek00

Senior
Aug 28, 2002
391
0
UAL777flyer:

I'd be willing to bet that WHQ insisted upon a limited vs. broad S.1113 letter as a mandatory condition to an ATSB concessionary agreement. If UA seeks Chapter 11 protection, the current concessionary plans will almost certainly be inadequate for a successful restructuring. Therefore, mgmt. had to leave UAL an out in the event that UAL had to seek a judicially-supervised reorganization.
 

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