Judge approves United Airlines' reorganization plan
Friday, January 20th 2006, 1:17 pm
By: News On 6
CHICAGO (AP) _ United Airlines' reorganization plan won final approval by a judge Friday, clearing the way for the nation's second biggest carrier to come out of bankruptcy in less than two weeks.
The ruling by U.S. Bankruptcy Judge Eugene Wedoff, after remaining objections to United's reorganization plan were resolved this week, keeps United on a path to emerge from Chapter 11 on Feb. 1 after the largest and longest airline bankruptcy in history.
Wedoff said there is ``reason to feel good'' about United's restructuring, even though it took about twice as long as first projected.
``Three years ago United Airlines was in danger of dying,'' he said. After using bankruptcy law to reorganize, ``once again it has the potential to be a profitable investment, a reliable business partner, and a stable employer.''
United officials and attorneys were happy with the ruling, but acknowledged the restructuring had been even more challenging than expected.
``It was every bit as difficult as we expected it to be and then some,'' said chief financial officer Jake Brace. He said the carrier has a much more competitive cost structure now and is well positioned to compete with its rivals.
United ranks second to AMR Corp.'s American Airlines among U.S. carriers.
While Elk Grove Village, Ill.-based United has kept flying throughout the bankruptcy proceedings, the company that exits bankruptcy will be much leaner than the cost-heavy one that began its restructuring on Dec. 9, 2002.
Parent company UAL Corp. has used the protection of federal bankruptcy law to trim $7 billion in annual costs, including two rounds of employee pay cuts; eliminate more than 25,000 jobs; dump its defined-benefit pensions and reduce its cost structure.
It also has shed more than 100 airplanes from its fleet, cut some U.S. flights and expanded internationally.
Once the 37-month restructuring is ended, the airline plans to spend more money this year on improvements, allocating $400 million for capital improvements such as more check-in kiosks, refurbished airplane interiors, upgraded computer systems and new ground equipment.
The airline's move to eliminate traditional pensions and replace them with less lucrative 401(k)-style ones prompted the biggest turmoil of its bankruptcy. That battle ended earlier this week when flight attendants ended a yearlong legal battle against the company and reached tentative agreement on a replacement retirement plan.
Some unions and industry experts say employee morale could still be an issue after United leaves bankruptcy, particularly with resentment still high over the stock plan that will award 8 percent of the 125 million new UAL shares to 400 top managers.
So will high fuel prices, which are hampering the company's efforts to get back into the black. UAL has reported more than $15 billion in net losses since mid-2000.