UAL gets another month on restructuring plan

Other parties can offer Chapter 11 remedy in Nov.

September 18, 2004|By Melissa Allison | Melissa Allison,CHICAGO TRIBUNE

A bankruptcy judge gave United Airlines a one-month reprieve yesterday on his threat to allow outsiders to bid for control of the company, giving parent UAL Corp. the exclusive right, until the end of October, to submit a reorganization plan before competing plans can be offered.

Judge Eugene Wedoff said the airline's monthly status report, filed Thursday, indicated that the company is making strides toward improving communication with unions and others.

Before yesterday's hearing, United struck a deal for another month of exclusivity with all but one party that had been asking the court to revoke it.

Wedoff plans to hold a hearing on the matter Oct. 15, the same day he considers a motion by the Machinists union to appoint a trustee to guide United out of bankruptcy.

The flight attendants union has joined that motion and was the only party that did not want United's management to maintain exclusivity for another month.

United's pilots union, which supported the extension, nevertheless issued a scathing indictment of management yesterday.

"It must be said that the United pilots are growing increasingly concerned that the company's current management team may not be able to craft a bankruptcy exit that preserves a strong, profitable enterprise," the union said in a statement.

"We will need the answer to this question during the next several weeks or we will be compelled to explore other solutions," the union said.

Douglas Baird, a bankruptcy professor at the University of Chicago Law School, said United might lose its exclusivity, but "we're a million miles away from having a trustee appointed in a case like this."

United's unions are not big enough creditors to persuade a judge to appoint a trustee, he said. The unsecured creditors committee or the firms financing United's bankruptcy would have to request a trustee for the move to be taken seriously.

Still, Baird said, United's disclosure Thursday that it needs a total of $1.15 billion in cost cuts - nearly twice what it identified only two weeks ago - is not startling. However, he added, "having bad nine-digit news month after month is not something that makes you feel particularly confident about a successful reorganization."

That makes United's loss of exclusivity more likely in the coming months, although experts say such a loss rarely puts a company's management in jeopardy.

The Chicago Tribune is a Tribune Publishing company.

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