Judge tells United to mend fences--or else
By Melissa
Allison
Tribune staff reporter
August 21, 2004
A bankruptcy court judge warned United Airlines on Friday that he will let
outsiders bid for control of the troubled carrier if management does not
improve deteriorating relationships with its unions and others.
The airline's unions have been outraged at United's decision to stop paying
into pension plans. They were further agitated this week after the carrier
said it would "likely" terminate all four of its plans.
Judge Eugene Wedoff said a communications breakdown between workers and
management seems to have occurred after United lost its bid for a federal
loan guarantee nearly two months ago. He gave the airline until the end of
September to repair relations with its increasingly bitter workforce.
If that does not happen, Wedoff said, he is prepared to "go the other route.
I just hope I don't have to."
Throughout its 20-month bankruptcy, United's management has had the
exclusive right to reorganize the airline.
Two United unions already had asked the judge to revoke the carrier's right
to exclusivity, saying they no longer trusted management and wanted other
investors, which often bring their own executive teams, to come to the
table.
Despite the animosity, Wedoff approved United's new $1 billion financing
package on Friday, which it needs to continue operating during bankruptcy.
Union leaders and the federal agency that insures pensions opposed the
package because United indicated that the financing arrangement was the
reason the carrier could no longer make contributions to its pension plans.
Those plans are underfunded by $8.3 billion, according to government
figures.
The carrier acknowledged Friday that the financing package included no such
provision regarding pension payments. United said it had not included the
payments in the business plan it presented to lenders.
Wedoff said it was "unfortunate that the message went out" that the
financing package prohibited the carrier from making pension contributions.
Another "unfortunate communication" was the way United told its unions that
it probably will terminate pension plans, Wedoff said. Union attorneys made
it clear during the hearing that they were blindsided by the decision.
After the hearing, a spokesman for one of those unions said it hopes to work
with United in finding "less drastic solutions" to the termination of the
airline's pension funds.
"We have not been included in the process," said Joseph Tiberi, a spokesman
for the International Association of Machinists and Aerospace Workers.
Also Friday, Wedoff granted an injunction United sought against two lawsuits
the machinists union filed against the airline's executives in other courts.
Wedoff said his court is the place to hear questions about how management
has handled its duties.
"One of the unions has recognized that and has a pending motion for an
independent trustee," Wedoff said of a machinists union motion scheduled for
a hearing in September.
The union wants a bankruptcy trustee to whom current management, including
Chief Executive Glenn Tilton, would have to report.
Copyright © 2004, Chicago Tribune