United Airlines moved to the brink Wednesday of getting a final go-ahead to leave bankruptcy, winning court approval for its controversial management stock plan and resolving differences with its combative flight attendants’ union.
With all remaining objections to the plan settled or overruled at a daylong confirmation hearing, U.S. Bankruptcy Judge Eugene Wedoff said he expects to formally sign off on the company’s reorganization plan Friday.
The all-but-certain approval prompted a round of congratulatory handshakes among United attorneys and officials in bankruptcy court Wednesday evening.
“We did everything that we set out to do,” Jake Brace, United’s chief financial officer, told reporters after the hearing. “We have to wait a couple of days to get the final order we need.”
The anticipated ruling Friday, barring last-minute glitches, will remove the final obstacle to the targeted Feb. 1 exit from bankruptcy for United and parent UAL Corp. after a more than three-year restructuring — the largest and longest airline bankruptcy ever.
All that remains then, Brace said, is to finish United’s financing process and get the money from its lenders.
“We’re looking forward to getting out of bankruptcy,” he said. “Then we’ll be able to focus all our efforts on the customer, which is what we do best.”
The confirmation hearing represented a last chance for unions and others to air their protests and was scheduled to last as long as three days. But the Elk Grove Village, Ill.-based company sailed through the proceedings in about six hours of courtroom time with only muted resistance, despite expectations of a possible showdown over the stock plan.
Under that plan, 400 management executives stand to receive 8 percent of the total shares the company intends to issue upon its emergence from bankruptcy — valued at roughly $152 million. The stock comes on top of annual salaries that will total $3.5 million for the top eight UAL Corp. executives.
Wedoff said the plan is within the range of other companies’ plans and that it would be difficult for the court to decide whether it is excessive.
“It may very well be that we have a culture in this country that overpays management ... but United is just one enterprise that functions in that environment,” he said, overruling objections to the plan.
Sharon Levine, attorney for the International Association of Machinists and Aerospace Workers, had called the plan “simply inappropriate under these circumstances.” She said that “lining management’s pockets” would set a bad precedent for other airline bankruptcies.
Ending a yearlong pension battle, United and its flight attendants announced a tentative agreement on a replacement pension plan and said the union had agreed to drop its legal action over the company’s termination of defined-benefit pensions.
The Association of Flight Attendants, which has bitterly fought United over the elimination of defined benefit employee-pension plans, had been expected to excoriate the company in the courtroom. But the union agreed to the defined-contribution retirement plan instead and did not testify against the stock plan.
“Our battle for retirement security included exhaustive efforts in the courts, on Capitol Hill and at the bargaining table,” said Greg Davidowitch, the AFA leader for United flight attendants, in a statement. “Within the context of bankruptcy and today’s political climate, this agreement provides a foundation of retirement security for flight attendants.”
The union’s retirement plan would include a 3 percent company match and a 2 percent direct contribution, both effective Jan. 1 of this year. The direct contributions would increase a half-percent in 2007 and again in 2008 for a total of 6 percent, the union said.
The company announced a new UAL board of directors that includes seven holdovers from the existing board and five new members chosen by the committee of unsecured creditors. They are Richard J. Almeida, retired chairman and CEO of Heller Financial Inc.; Walter Isaacson, president and CEO of The Aspen Institute; Janet Langford Kelly, a partner at Zelle, Hofmann, Voelbel, Mason & Gette LLP; Robert D. Krebs, retired chairman of Burlington Northern Santa Fe Corp.; and David Vitale, chief administrative officer of Chicago Public Schools.
The seven retained directors are CEO Glenn Tilton; James Farrell, chairman of Illinois Tools Works Inc.; Robert S. Miller Jr., chairman and CEO of Delphi Corp.; James J. O’Connor, retired chairman and CEO of Unicom Corp.; John H. Walker, president and CEO of The Boler Co.; and the two existing labor representatives — Mark Bathurst of the United Airlines Pilots Master Executive Council and Randy Canale, president and general chairman of Machinists’ District Lodge 141.