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Judge tells United to mend fences--or else
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By Melissa Allison
Tribune staff reporter
August 21, 2004
A bankruptcy court judge warned United Airlines on Friday that he will let outsiders bid for control of the troubled carrier if management does not improve deteriorating relationships with its unions and others.
The airline's unions have been outraged at United's decision to stop paying into pension plans. They were further agitated this week after the carrier said it would "likely" terminate all four of its plans.
Judge Eugene Wedoff said a communications breakdown between workers and management seems to have occurred after United lost its bid for a federal loan guarantee nearly two months ago. He gave the airline until the end of September to repair relations with its increasingly bitter workforce.
If that does not happen, Wedoff said, he is prepared to "go the other route. I just hope I don't have to."
Throughout its 20-month bankruptcy, United's management has had the exclusive right to reorganize the airline.
Two United unions already had asked the judge to revoke the carrier's right to exclusivity, saying they no longer trusted management and wanted other investors, which often bring their own executive teams, to come to the table.
Despite the animosity, Wedoff approved United's new $1 billion financing package on Friday, which it needs to continue operating during bankruptcy.
Union leaders and the federal agency that insures pensions opposed the package because United indicated that the financing arrangement was the reason the carrier could no longer make contributions to its pension plans. Those plans are underfunded by $8.3 billion, according to government figures.
The carrier acknowledged Friday that the financing package included no such provision regarding pension payments. United said it had not included the payments in the business plan it presented to lenders.
Wedoff said it was "unfortunate that the message went out" that the financing package prohibited the carrier from making pension contributions.
Another "unfortunate communication" was the way United told its unions that it probably will terminate pension plans, Wedoff said. Union attorneys made it clear during the hearing that they were blindsided by the decision.
After the hearing, a spokesman for one of those unions said it hopes to work with United in finding "less drastic solutions" to the termination of the airline's pension funds.
"We have not been included in the process," said Joseph Tiberi, a spokesman for the International Association of Machinists and Aerospace Workers.
Also Friday, Wedoff granted an injunction United sought against two lawsuits the machinists union filed against the airline's executives in other courts.
Wedoff said his court is the place to hear questions about how management has handled its duties.
"One of the unions has recognized that and has a pending motion for an independent trustee," Wedoff said of a machinists union motion scheduled for a hearing in September.
The union wants a bankruptcy trustee to whom current management, including Chief Executive Glenn Tilton, would have to report.
Copyright © 2004, Chicago Tribune
Advertisement
By Melissa Allison
Tribune staff reporter
August 21, 2004
A bankruptcy court judge warned United Airlines on Friday that he will let outsiders bid for control of the troubled carrier if management does not improve deteriorating relationships with its unions and others.
The airline's unions have been outraged at United's decision to stop paying into pension plans. They were further agitated this week after the carrier said it would "likely" terminate all four of its plans.
Judge Eugene Wedoff said a communications breakdown between workers and management seems to have occurred after United lost its bid for a federal loan guarantee nearly two months ago. He gave the airline until the end of September to repair relations with its increasingly bitter workforce.
If that does not happen, Wedoff said, he is prepared to "go the other route. I just hope I don't have to."
Throughout its 20-month bankruptcy, United's management has had the exclusive right to reorganize the airline.
Two United unions already had asked the judge to revoke the carrier's right to exclusivity, saying they no longer trusted management and wanted other investors, which often bring their own executive teams, to come to the table.
Despite the animosity, Wedoff approved United's new $1 billion financing package on Friday, which it needs to continue operating during bankruptcy.
Union leaders and the federal agency that insures pensions opposed the package because United indicated that the financing arrangement was the reason the carrier could no longer make contributions to its pension plans. Those plans are underfunded by $8.3 billion, according to government figures.
The carrier acknowledged Friday that the financing package included no such provision regarding pension payments. United said it had not included the payments in the business plan it presented to lenders.
Wedoff said it was "unfortunate that the message went out" that the financing package prohibited the carrier from making pension contributions.
Another "unfortunate communication" was the way United told its unions that it probably will terminate pension plans, Wedoff said. Union attorneys made it clear during the hearing that they were blindsided by the decision.
After the hearing, a spokesman for one of those unions said it hopes to work with United in finding "less drastic solutions" to the termination of the airline's pension funds.
"We have not been included in the process," said Joseph Tiberi, a spokesman for the International Association of Machinists and Aerospace Workers.
Also Friday, Wedoff granted an injunction United sought against two lawsuits the machinists union filed against the airline's executives in other courts.
Wedoff said his court is the place to hear questions about how management has handled its duties.
"One of the unions has recognized that and has a pending motion for an independent trustee," Wedoff said of a machinists union motion scheduled for a hearing in September.
The union wants a bankruptcy trustee to whom current management, including Chief Executive Glenn Tilton, would have to report.
Copyright © 2004, Chicago Tribune
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