Human Capital & Careers

UAL Gets Bankruptcy Plan Extension

Airline company reorganization may include canceling its pension plans.
Ed ZwirnAugust 23, 2004

UAL Corp.’s United Airlines has more time to prepare for bankruptcy.

The company on Friday said it has agreed with its creditors committee to a 30-day extension on the period in which it can file its own bankruptcy reorganization plan, shorter than UAL’s recent request for a four-month extension, Reuters reported. The new agreement is still subject to court approval by a bankruptcy judge.

United’s bankruptcy attorney James Sprayregen said United agreed not to seek final approval of any business plan during those 30 days, the wire service noted, while the creditors committee agreed not to press any alternative restructuring strategies of its own during the period.

But not everybody working for the airline is altogether pleased with Friday’s announcements. UAL reportedly warned again in bankruptcy court papers filed in Chicago Wednesday that it probably would have to cancel and replace its defined-benefit pension plans in order to recover, according to CBS Marketwatch.

“Given the magnitude of further cost reductions needed to create a viable business plan and attract exit financing, termination and replacement of all our defined-benefit pension plans likely will be required,” UAL reportedly said in the court motion.

The company reportedly sent an E-mail to employees on Thursday, restating its position and noting that no final decision on the matter had been made.

The airline, which plunged into bankruptcy in December 2002, has said it also plans to drop about $500 million in pension plan contributions this fall as part of a recently amended agreement with lenders willing to help pull it out of bankruptcy.