Mon, Aug 23, 2004
But Not The Four Months It Asked For
Once again, United Airlines has gone to the federal well and
come up with less than it had hoped. After being turned down for
$1.6 billion in loan guarantees by the Air Transportation
Stabilization Board, United asked a Chicago federal judge for four
more months before creditors could file competing reorganization
plans.
Friday's hearing before Judge Eugene Wedoff was by no means a
total disappointment to UAL. Instead, Wedoff granted the airline
changes in its debtor-in-possession financing that will give United
$500 million more to work with as it continues reorganizing.
But much of the hearing focused on United's prediction that it
will probably have to terminate its employee pension funds. As ANN
reported last week, United has stopped contributing to employee
pensions while in bankruptcy and believes the funds are too much of
a burden to continue as it emerges from Chapter 11 protection.
But Judge Wedoff said he considers
the latest UAL statement on pensions a "correction" of earlier
statements, according to Reuters. Last month, UAL executives said
the company's debtor-in-possession financing "prohibited" company
contributions to the pension plan. That touched off a panic (and
not a few threats) among employees and retirees, not to mention a
gasp of horror from the Pension Board Guaranty Corporation. Now,
the airline says its decision to stop pension payments while in
Chapter 11 wasn't required by creditors. Instead, United leaders
say the decision was based on sound financial practices.
But that didn't do anything to mitigate the fury of both
employees and federal pension officials. A lawyer for the PBGC told
Wedoff Friday that United was "thumbing their nose at the entire
system" by halting contributions, according to Reuters.
If United does abandon its pension contributions, it wouldn't be
the first airline to do so. That dubious honor belongs to US
Airways, which ended the contributions during its bankruptcy.
Delta, also riding the thin red line of bankruptcy, has demanded
changes in its pilot pension fund.
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