[PEN-L:33120] UAL bargaining dynamics

["Ian Murray" <seamus2001@xxxxxxxxx>]

3 United Unions Named To Bankruptcy Panel
By Keith L. Alexander
Washington Post Staff Writer
Saturday, December 14, 2002; Page E01


CHICAGO, Dec. 13 -- United Airlines' three major unions and 10 of its
largest creditors were appointed today to the creditors committee that
will play a critical role in the airline's reorganization.

Nearly 300 lawyers, creditors and financial advisers to United's parent,
UAL Corp., crowded into a Chicago hotel today, most jostling to become
part of the committee that can obtain key information during the
company's bankruptcy reorganization and help steer management decisions.

U.S. Trustee Ira Bodenstein appointed only 13 members. They included the
major unions -- the Air Line Pilots Association, the International
Association of Machinists and the Association of Flight Attendants --
and included aircraft manufacturer Airbus North America, marketing
partner Deutsche Lufthansa, bondholder Bank of New York and computer
reservation systems operator Galileo International. United's lawyer,
James H.M. Sprayregen of Kirkland & Ellis, said the airline plans to
begin talks with the committee as soon as possible.

Appointing labor representatives to creditors committees is not unusual,
Sprayregen said. Trans World Airlines, which Sprayregen represented
during its last bankruptcy reorganization, had them and US Airways does
now.

United's chief financial officer, Frederic F. "Jake" Brace, gave the
creditors a brief outline of United's financial history and current
problems. Brace said the year-end loss would be slightly more than the
$2.1 billion it lost last year.

"We are undertaking a transformation of our business," Brace said.
United plans to reduce the size of its fleet and is talking with
aircraft manufacturers to renegotiate plane leases, he said. The airline
has 2,500 new proposals being reviewed by various aircraft lease owners,
he said.

"We have to shrink a significant number of aircraft and a variety of
types," Brace said.

Brace also said the airline is discussing additional pay cuts with its
unions. He said United's 80,000 employees should expect to give up more
than the $5.2 billion over 51/2 years that they have already agreed to
accept.

Since United filed for bankruptcy protection on Monday, Brace said,
fewer passengers than the airline's executives expected have canceled
their bookings.

The scene at the Sheraton hotel here seemed like an Ivy-League law
school reunion. Lawyers rekindled relationships with colleagues familiar
from other airline bankruptcy cases.

Some of them got a head start positioning for a slot on the committee.
"We started communicating with [Bodenstein] Monday. We have a vested
interest in seeing that United Airlines reorganizes," said Alan K.
Mills, representing the city of Indianapolis, which did not get a seat.
One of United's largest maintenance bases is in Indianapolis.

"This is reminiscent of the Eastern [Airlines] bankruptcy," said Harold
L. Kaplan, who represents several investors whose bonds have face value
of about $1 billion. "We're here because we want to be at the front of
the learning curve."

After the creditors committee was formed, law firms and financial
advisers remained to present their platform in an effort to be chosen as
the committee's representatives, a process that lawyers call "the beauty
pageant." The lead law firm for a creditors committee can earn millions
of dollars a month in fees, attorneys here said.

Of United's 130,000 creditors, only 60 of the largest were notified of
the meeting, Bodenstein said, including the Retirement Systems of
Alabama, the pension fund that plans to take over US Airways under that
carrier's reorganization proposal. United owes the fund $340 million.

Still, a source in Bodenstein's office said there were more creditors
represented at today's meeting than at the first meeting in Kmart
Corp.'s bankruptcy proceeding.

Bodenstein said size of claims were among the criteria used to determine
the members from among the many categories of creditors. The airline's
next hearing is scheduled for Dec. 30 , when the bankruptcy court will
decide if it can fully tap $1.5 billion in interim financing. Earlier in
the week, United was allowed to use $800 million.

Sprayregen said United had "a lot of work" ahead but that he expected
the reorganization to be complete by June 2004.