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.