United Airlines’ three-year bankruptcy restructuring, the largest and longest in the industry’s history, will end up costing the carrier more than $335 million in fees to lawyers and consultants, court documents show.
The fees include $99.8 million charged by the airline’s lead law firm during the 38-month process, Chicago-based Kirkland & Ellis LLC, pending formal approval by U.S. Bankruptcy Court.
United emerged from Chapter 11 bankruptcy on Feb. 1. It still has yet to make a profit in nearly six years.
A spokeswoman for United parent UAL Corp., Jean Medina, said Thursday that the heavy expenses were necessary. She noted that the Elk Grove Village, Ill.-based company reduced annual costs by $7 billion and debt by $13 billion in the restructuring.
“United’s bankruptcy was unique in its size and complexity, requiring specific legal, management and consulting needs,” Medina said.
All fees are reviewed by a fee audit committee appointed by the bankruptcy trustee and require advance approval, she said.
Kirkland & Ellis charged $93.7 million in fees and $6.1 million in expenses from Dec. 9, 2002, through Jan. 20, when United’s bankruptcy exit plan won final court approval. Those numbers will rise, along with the total, by millions more as law firms continue to make filings and court appearances in wrapping up loose ends in the case.
James Sprayregen, the Kirkland & Ellis partner who was United’s lead bankruptcy lawyer, performed $3.45 million worth of services, the firm said in a court filing Monday. He charged United for 4,419 hours in the case, billing at a top rate of $850 an hour.
The No. 2 United lawyer in the case, David Seligman, billed for $5.5 million in fees — working on the case 10,231 hours, or an average of 62.4 hours a week.
“It was a large, complex, lengthy case with many difficult issues that took long hours over nights, weekends and holidays by a large team from K&E ... at great sacrifice to many people’s personal lives,” Sprayregen said Thursday from New York. “In the context of very large transactions in the bankruptcy M&A world, the amount of the fees — while a large amount of money — is within any range of reasonableness.”
The overall amount of professional fees in these cases is no doubt substantial,” the firm said in a lengthy analysis of its fees, signed by Seligman. “However, putting these numbers in their proper context — one of the largest Chapter 11 cases of all time — the overall amount of compensation requested by all professionals is well within the expected range of reasonableness.”
The law firm called the average hourly rate of $356.08 charged by its more than 300 attorneys who billed for over 263,000 hours “more than reasonable” and said it compared favorably to the rates charged by other law firms in the case.
Joseph Schwieterman, transportation expert and economics professor at DePaul University in Chicago, said United “went the high-price, high-quality route” and it’s unclear whether it could have kept expenses more manageable.
“This was one of the most complicated bankruptcies in U.S. transportation history,” Schwieterman said. “The case was filled with ambiguity, with legal precedent on labor and contractual matters.” Still, he added, the $100 million billed by one law firm “does give me pause.”