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United Stock Plan Denounced: Reward to Managers `Excessive,' Pilots Say

Posted on: Saturday, 17 December 2005, 15:00 CST

By Mark Skertic, Chicago Tribune, Chicago Tribune

Dec. 17--United Airlines' plan to reward about 400 executives and managers with $285 million in stock when the carrier leaves bankruptcy protection is "excessive and extravagant," the airline's pilots said Friday.

"The so-called Management Equity Incentive Plan reeks of immorality," Capt. Steve Derebey said in a statement the Air Line Pilots Association released after the plan was discussed at a scheduled bankruptcy court status hearing.

The union is among several that have objected to the plan giving top management 15 percent ownership of the airline. After three years in bankruptcy, United expects to exit court protection in early 2006.

The airline's flight attendants, the machinists union and committee of unsecured creditors all have objected to the plan that would give newly issued stock in the reorganized company.

The value of current United stock will be wiped out before the airline leaves bankruptcy protection.

United has refused to release information about the management stock plan, Robert Clayman, attorney for the flight attendants, told the court Friday.

There has been no evidence that the managers' performance will determine how stock is distributed, he said.

"This has created, at least among the flight attendants, a tremendous amount of concern, if not downright anger, because of that," Clayman said.

Employees of Elk Grove Township-based United have gone through several rounds of pay and benefit cuts as the airline reduced costs in an effort to return to profitability. The International Association of Machinists and Aerospace Workers called the plan "lavish" and "grotesque." Union members "ratified cost savings in the name of shared sacrifice," machinists said in their objection. "Now, the debtors seek to pay their management and board of directors enormous bonuses."

United management has defended the stock plan as common in large, publicly traded companies. The airline has said that to be competitive in the workplace, it needs to offer a management equity plan.

Details of the plan still are being worked out, said Jake Brace, chief financial officer. The plan will be shared with unions and the creditors committee once it is finalized, he said.

There are 55 objections filed with the court to United's bankruptcy exit plan, but Brace said he remains confident they will be resolved without interrupting the airline's exit schedule.

Several hurdles remain before the airline can exit bankruptcy court protection. Monday is the deadline for creditors to vote on United's reorganization plan. Results must be announced by Dec. 30.

Next month, the court will consider whether to confirm the reorganization plan.

Also Friday, Bankruptcy Judge Eugene Wedoff cleared roadblocks to United's plans to take possession of 14 leased aircraft. While the airline has been able to restructure most other plane leases, the 14 have been tied up in legal disputes.

Wedoff also approved a plan that adds General Electric Co. to the list of companies providing up to $3 billion in exit financing to United's parent, UAL Corp. JP Morgan Chase & Co. and Citigroup Inc. also are providing loans to the airline.

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Copyright (c) 2005, Chicago Tribune

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Source: Chicago Tribune

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