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United Airlines Unveils Plan to Get Out of Bankruptcy

Posted on: Wednesday, 7 September 2005, 18:00 CDT

Sep. 7--Nearly three years after filing for Chapter 11, United Airlines at last has a schedule for getting out of bankruptcy.

United intends to file its reorganization plan today and exit from bankruptcy as soon as February.

The plan will include a "financial road map" for the first few years after exit. It could include terms for such major changes as issuance of new stock.

The reorganization plan also will describe how the company's creditors will be paid.

United, which has 57,500 employees, including about 5,400 in metro Denver, filed for Chapter 11 bankruptcy protection in December 2002. It originally planned to get out of bankruptcy in 2003, then pushed that back to 2004, 2005 and now 2006.

The airline ran into problems that include failing to secure a crucial government-loan guarantee and rising jet-fuel prices.

Originally, more than 40,000 claims were filed in excess of $3.6 trillion. More than 25,000 of those claims have been eliminated, but about $45 billion remain, according to United.

An estimated $30 billion worth are unsecured claims.

Three groups account for about two-thirds of the unsecured claims. Union-represented employees have been promised about $7.5 billion in labor agreements. The Pension Benefit Guaranty Corp. wants about $9.5 billion for unfunded benefits liability. Fifteen victims of the Sept. 11, 2001, terrorist attacks have claimed about $2.1 billion.

United wants to resolve those claims before exiting bankruptcy.

United also plans to file a disclosure statement today that will explain the reorganization plan and will be used by creditors in deciding whether to approve the plan. The proposed deadline for voting and for objecting to the plan is Dec. 1.

As part of its reorganization, United plans to sell its MyPoints.com business, an Internet direct-marketing company based in San Francisco with regional offices in Schaumburg, Ill., and New York.

Separately, United said Tuesday that it plans to outsource some computer-services work and is seeking an agreement with computer-services firm EDS.

About 357 United information-services employees in Denver, the Chicago area, Los Angeles, Washington, Hong Kong and the United Kingdom will be affected by that change, probably in 30-60 days, according to United.

Those employees can apply for jobs at EDS or in other departments at United.

Also today, United plans to switch entirely to manual baggage handling at Denver International Airport, marking an end to the troubled automated baggage system.

United plans to keep the automated system operable until early next month, in case problems with the new manual process arise. Phelps Program Management, which did maintenance on the system, will no longer do that work for United.

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UALAQ, EDS,

Source: The Denver Post

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