Final Hearings Much Smoother Than Expected

Barring a last minute surprise, it looks like Friday will be the day United executives will finally be able to utter the words they've waited three years to say: goodbye, Chapter 11.

"We're not quite to the finish line, but everybody looked at the situation and said this is essentially done," said United Airlines Chief Financial Officer Jake Brace, after Wednesday's court hearing that resolved the last of the objections to the carrier's plan to emerge from bankruptcy.

At the end of the hearing, Bankruptcy Judge Eugene Wedoff hinted he would rule in favor of United's plan Friday -- as long as United swiftly amends its reorganization plan to reflect the objections.

"All we really need to do now is document the changes," Brace said. "It seems pretty clear that if we do that and show up on Friday, the judge will confirm the plan."

If Wedoff does give his approval Friday, United would exit bankruptcy on February 1 -- thus putting an end to the longest, costliest bankruptcy in the history of US airlines, according to the Rocky Mountain News.

While the decision would technically still allow some groups to appeal the judge's ruling, it appears unlikely they will do so -- especially as United executives were on the receiving end of congratulatory handshakes from many of the attorneys representing the airlines' creditors.

It's not clear if the creditors themselves would do the same, however -- as many will receive settlements of between 4 and 8 cents on the dollar on what they're owed. Airline workers also took two pay cuts over the three years United has been in bankruptcy, and lost their pensions.

Nevertheless, it's time to celebrate for United executives, who will soon be at the reins of a leaner, more competitive company... at a time when domestic airlines are expected to regain some of the footing lost after 9/11 and the recent spikes in fuel prices.

"It's been a difficult three years for many of our stakeholders, and we appreciate the many sacrifices they made," Brace said. "But those sacrifices have manifested themselves into improved operating results."

Those executives are also likely counting their blessings, that the final proceedings were far less contentious that many had expected. The court had set aside three days to hear final objections from unions and others; it took about six hours.

"I think it was smoother than a lot of people expected," said industry insider Alan Sbarra. "People thought there would be more of a fight from the unions and a bigger fight over executives getting bonuses, but it went through quickly. Maybe everyone is just worn out and wants to get moving."

Not even United's plan to reward 400 executives with 8 percent of new shares the company expects to issue following its emergence from bankruptcy blocked the judge from stating United is in the clear.

"It may very well be that we have a culture in this country that overpays management... but United is just one enterprise that functions in that environment," said Judge Wedoff, in spite of objections from the International Association of Machinists and Aerospace Workers calling the plan "simply inappropriate under these circumstances."

Receiving less press, although important in its own right, was the tentative offer also reached Wednesday between United and its flight attendants union over the carrier's decision to drop their pension plans. A replacement pension plan -- including a 3 percent company match and a 2 percent direct contribution, according to United representatives -- was agreed upon.

The airline has also appointed a new board of directors, according to the News, made up of a mix of current UAL directors and employees, and those appointed by the Official Committee of Unsecured Creditors.

FMI: www.united.com