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3 unions on creditors panel
United Airlines, whose internecine worker-management strife contributed to its downfall, now finds that its beleaguered unions will play a significant role in shaping the way the company will reinvent itself.
On Friday, the Association of Flight Attendants, the Air Line Pilots Association, and the International Association of Machinists were among 13 entities named to the unsecured creditors committee for UAL Corp., parent of United Airlines.
Michael Boyd, president of the Boyd Group, an airline consulting company in Evergreen, Colo., was startled by their selection.
"The creditors committee is like a family feud. They all hate each other," said Boyd, who often has blamed the unions for many of United's troubles. "They all are not working for the good of all."
The committee was appointed by Ira Bodenstien, the U.S. bankruptcy trustee for the Northern District of Illinois, after an almost three-hour closed-door meeting at the Sheraton Chicago Hotel & Towers. UAL filed for federal bankruptcy protection on Monday, listing assets of $22.8 billion and liabilities of $21.2 billion.
Most of the 250 people attending the meeting were lawyers and financial advisers seeking to be hired by the committee. Some came bearing proposals.
Navigant Consulting Inc., for example, suggested that selling United's Pacific routes would reap enough money to pay off unsecured creditors.
The Pacific and Latin American routes, along with landing rights at Heathrow International Airport in London, were offered as collateral by United in its ill-fated effort to obtain a $2 billion bailout from the Air Transportation Stabilization Board. The federal board said the collateral was worthless because it was subject to government regulations. United bought the Pacific routes in 1986 for $715 million from Pan American Airways.
Also seeking to be hired was attorney Scott Hazan, whose firm, Otterbourg, Steindler, Houston & Rosen, also represents the creditors committee in the US Airways reorganization. Some analysts suggested that hiring Hazan's firm could create conflicts of interest, particularly if US Airways should covet some of United's gates and routes at Dulles International Airport, which is a hub for both airlines.
Separately, State Street Bank & Trust of Boston is seeking an emergency hearing on Monday in bankruptcy court to overturn an order blocking it from selling more shares of UAL stock.
State Street, appointed in September as the trustee of United's employee stock ownership plan, has sold about 42 percent of the 56 million shares held by United employees in the plan, a move that has resulted in $43 million being deposited into employee accounts. The bank argued in a filing in bankruptcy court that it could garner another $37 million if permitted to sell. If it is blocked, it said, the shares "will lose their value in a very short period of time."
Employees had owned a 55 percent stake in the airline. That stake has declined to about 37 percent. UAL shares closed Friday at $1.75, up 18 cents.
Named as interim chair of the creditors committee was Airbus North America Holdings Inc., owed almost $47.6 million. Also named to the committee were Bank of New York, owed $1.6 billion; US Bank National Association, $132 million; aircraft engine-maker Pratt & Whitney, $4 million; HSBC Bank USA, $32.4 million; Deutsche Lufthansa AG, whose LSG Skychef airline food catering service is owed $3.5 million; and Galileo International Inc., a Rosemont-based airline reservation service, $13 million.
Other members with unspecified claims are Pension Benefit Guaranty Corp.; Goodrich Corp., which supplies aircraft wheels and brakes and spare part services; and R Squared Investments LDC, a small bondholder.
Major creditors left out included Indianapolis International, Denver International and San Francisco International Airports, which are on the hook for a combined $182 million. The City of Chicago, however, was named an ex officio member of the committee.
Under the bankruptcy code, governments entities technically are not considered eligible to serve on an unsecured creditors' committee.
Dennis O'Dea, an attorney with WolfBlock in New York representing Goodrich Corp., said the bankruptcy trustee was charged with appointing a committee that could balance competing interests that often hold diametrically opposing visions for the outcome of the case.
"The difficulty in bankruptcy historically has been that the financiers, whose money is already in--and who are not planning to put any more money in--are looking at bankruptcy as a means of getting their money back. That generally is their sole objective," O'Dea said.
"People who are engaged in ongoing long-term and historic relationships with the debtor oftentimes seek not only to recover the money that is owed but also desire to see the company continue to operate."