United agrees to delay in bid to leave bankruptcy

Panel of creditors wants more time to review plan

August 03, 2005|By John Schmeltzer | John Schmeltzer,CHICAGO TRIBUNE

United Airlines efforts to emerge from bankruptcy may be delayed until next year, the airline said yesterday as it announced another delay in the filing of its long-awaited reorganization plan.

The airline, which began setting and breaking dates nearly two years ago to emerge from bankruptcy protection, agreed to the delay requested by a committee of unsecured creditors so they could review the plan. The 13-member group, which represents the airline's hundreds of unsecured creditors, reportedly has been studying the proposed plan for about a month.

Unless the committee wraps up its work by Aug. 12, United will have to ask Bankruptcy Court Judge Eugene Wedoff at a hearing on Aug. 26 for another extension.

Fruman Jacobson, an attorney representing the unsecured creditors, declined to comment on how much more time the committee needs to study the plan. "We remain in serious discussions working with them on a confirmable plan of reorganization," he said.

United spokeswoman Carol Medina acknowledged that United, which has not made money in five years, has been pushing to emerge from bankruptcy this year.

"Our timeline remains aggressive and ambitious," she said. "We think this approach [to delay filing of the plan] is going to help us have a smoother exit process."

However, she said the delay could slow the process to exit from bankruptcy to "later this year or early next."

At least for now, however, the delay keeps at bay the competing groups that are expected to file their own reorganization plans.

Most analysts and industry experts said they were not surprised by the delay.

"We have come to expect delays with this bankruptcy," said Joseph Schwieterman, an economics professor at DePaul University who specializes in transportation. "The optimism we heard in the spring was clearly misplaced. Many people thought back then, and still feel now, that with the way the fuel situation is, it is still unclear whether this company has the cost structure to survive outside Chapter 11."

Two months ago, Glenn Tilton, United's chairman and chief executive, said United's proposed business plan contemplated oil prices at about $50 a barrel. And he said he expected the airline would be profitable in 2006. However, oil closed at a new record high yesterday, $61.89 a barrel.

Michael Boyd, president of the Boyd Group, an aviation consulting company, said "credibility" has become an issue as the airline repeatedly fails to emerge from bankruptcy as planned. "It looks like they really don't have a plan," said Boyd.

The Chicago Tribune is a Tribune Publishing newspaper.

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