UnitedChicago
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- Aug 27, 2002
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This is good news after our debate of yesterday.
United lease talks extended
Final fleet size closely guarded
By John Schmeltzer
Tribune staff reporter
Published February 7, 2003
Turning up the pressure on aircraft lessors, United Airlines on Thursday obtained a court order allowing it more time to obtain better deals on many of its jets.
The company also told U.S. Bankruptcy Judge Eugene Wedoff that it is temporarily accepting existing leases on 154 jets, most of which are newer Boeing 777s and Airbus A320s.
Marc Kieselstein, an attorney with the Chicago law firm of Kirkland & Ellis, said that the Elk Grove Township-based airline intends to pay $128 million in back rent on those jets and will continue making payments based upon the existing leases.
United leases 463 of its 567 planes. When the airline filed for bankruptcy in December, it said it planned to reduce flights by 6 percent this year, which could cut its fleet by as many as 50 jets. At the end of 2001, United owed more than $7 billion on long-term jet leases.
Nearly a dozen major companies have disclosed they have billions of dollars worth of planes leased to the airline. Some already have written off their investments, expecting that United will terminate the leases.
In the past month, Whirlpool Corp., Walt Disney Co. and the Bank of New York have taken multimillion-dollar charges.
The airline said it would not disclose the number of planes it plans to keep, because competitors could use that data to attempt to wrest better deals for themselves.
Everyone want to know how many planes we''re going to need. We''re not going to tell them, said Jake Brace, United''s chief financial officer.
The Bankruptcy Court moves came as lessors, many of who had been expecting a decision Thursday on the number of planes United no longer would use, complained bitterly to Wedoff about tactics that United is using to negotiate new leases.
We don''t know what they''re doing, said attorney Jack Rose, contending that the Japanese banks he represents need better information on which to make a decision. We have a right to scrutinize what they are doing.
He argued for a more transparent process that permits them to observe what other deals the airline is making.
Rose, with the New York law firm of White & Case, took the lead for many of the more than 100 lawyers representing lessors. He said the tactics clearly impair the rights of the creditors.
Philip Morris Capital Corp., which had been demanding the return from United of the 26 jets the finance company owns, agreed to go along with the extension of time sought by United.
Another lawyer, William Riddell, said his clients objected to United''s unexpected move seeking the time extension.
We want to know today what the debtor is proposing to do with our aircraft, Riddell said.
Wedoff was unmoved by such complaints. He gave United permission to begin paying the lessors a reduced lease rate, which was not disclosed, for as long as 90 days while the airline continues to attempt to negotiate better deals.
Under the Bankruptcy Code, United had 60 days from the day it filed for Chapter 11 protection to decide which planes it would keep. Wedoff is permitted to grant extra time if the airline agrees to resume payments, even if at a reduced rate.
Wedoff also said United could continue negotiations in secret. That decision came after hearing Steve Carlson, the head of the 20-member committee United has created to negotiate the new leases, explain that competitors would love to know how much it is paying for its planes.
Such disclosures would give information to the marketplace--to our competitors--and give them a leg up on what some are now trying to do themselves, said Carlson, an apparent reference to American Airlines, which is struggling to cut $4 billion in costs from operations.
United lease talks extended
Final fleet size closely guarded
By John Schmeltzer
Tribune staff reporter
Published February 7, 2003
Turning up the pressure on aircraft lessors, United Airlines on Thursday obtained a court order allowing it more time to obtain better deals on many of its jets.
The company also told U.S. Bankruptcy Judge Eugene Wedoff that it is temporarily accepting existing leases on 154 jets, most of which are newer Boeing 777s and Airbus A320s.
Marc Kieselstein, an attorney with the Chicago law firm of Kirkland & Ellis, said that the Elk Grove Township-based airline intends to pay $128 million in back rent on those jets and will continue making payments based upon the existing leases.
United leases 463 of its 567 planes. When the airline filed for bankruptcy in December, it said it planned to reduce flights by 6 percent this year, which could cut its fleet by as many as 50 jets. At the end of 2001, United owed more than $7 billion on long-term jet leases.
Nearly a dozen major companies have disclosed they have billions of dollars worth of planes leased to the airline. Some already have written off their investments, expecting that United will terminate the leases.
In the past month, Whirlpool Corp., Walt Disney Co. and the Bank of New York have taken multimillion-dollar charges.
The airline said it would not disclose the number of planes it plans to keep, because competitors could use that data to attempt to wrest better deals for themselves.
Everyone want to know how many planes we''re going to need. We''re not going to tell them, said Jake Brace, United''s chief financial officer.
The Bankruptcy Court moves came as lessors, many of who had been expecting a decision Thursday on the number of planes United no longer would use, complained bitterly to Wedoff about tactics that United is using to negotiate new leases.
We don''t know what they''re doing, said attorney Jack Rose, contending that the Japanese banks he represents need better information on which to make a decision. We have a right to scrutinize what they are doing.
He argued for a more transparent process that permits them to observe what other deals the airline is making.
Rose, with the New York law firm of White & Case, took the lead for many of the more than 100 lawyers representing lessors. He said the tactics clearly impair the rights of the creditors.
Philip Morris Capital Corp., which had been demanding the return from United of the 26 jets the finance company owns, agreed to go along with the extension of time sought by United.
Another lawyer, William Riddell, said his clients objected to United''s unexpected move seeking the time extension.
We want to know today what the debtor is proposing to do with our aircraft, Riddell said.
Wedoff was unmoved by such complaints. He gave United permission to begin paying the lessors a reduced lease rate, which was not disclosed, for as long as 90 days while the airline continues to attempt to negotiate better deals.
Under the Bankruptcy Code, United had 60 days from the day it filed for Chapter 11 protection to decide which planes it would keep. Wedoff is permitted to grant extra time if the airline agrees to resume payments, even if at a reduced rate.
Wedoff also said United could continue negotiations in secret. That decision came after hearing Steve Carlson, the head of the 20-member committee United has created to negotiate the new leases, explain that competitors would love to know how much it is paying for its planes.
Such disclosures would give information to the marketplace--to our competitors--and give them a leg up on what some are now trying to do themselves, said Carlson, an apparent reference to American Airlines, which is struggling to cut $4 billion in costs from operations.
