Rottweiller
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Nov. 27--Troubled United Airlines faces another headache as it tries to emerge from bankruptcy: Creditors trying to repossess some of its planes.
A U.S. bankruptcy judge on Friday blocked efforts to seize up to 14 United jets by a group of financiers that controls about 175 aircraft, or roughly a third of the airline's fleet.
The group, represented by the Chicago-based law firm Chapman and Cutler LLP, sought to repossess up to eight Boeing 767s and six 737s on Wednesday. The move could have cost the Elk Grove Township-based airline tens of millions of dollars and played havoc with flight scheduling.
But U.S. Bankruptcy Judge Eugene Wedoff issued a temporary restraining order barring the group from seizing the planes, following a hearing called at United's request.
Another hearing on the matter is set for Dec. 15.
United, which is seeking to renegotiate its leases with creditors to lower the costs of operating its fleet, has argued that the Chapman group is violating antitrust laws by negotiating as a bloc instead of individual leaseholders.
As a bloc, they would have more power to force United to accept higher lease rates than the airline could negotiate with them individually, United contends.
"We believe the court rightly prevented this attempt to pressure United into accepting above-market rates for our aircraft leases," said Jean Medina, spokeswoman for the airline.
None of the other groups the airline owes have threatened to seize aircraft, Medina said.
"We've got agreements with all the other lessors, with the exception of those represented by this group," she said.
James Spiotto, one of the attorneys representing members of the Chapman group, did not return calls on Friday.
Earlier this year, members of the Chapman group were accused by United's unsecured creditors committee of attempting to overcharge United by about $1.1 billion for planes.
According to the lease terms, the lessors must give United notice of three business days before they reclaim planes. The airline said it was notified Wednesday night that the group planned to repossess aircraft, possibly as early as 12:01 a.m. on Dec. 1.
Once the airline was notified of the group's plans, contingency planning began to determine how to continue to meet the passenger needs during the busy holiday season with fewer aircraft, Medina said.
"We had begun looking at what we could do to accommodate our customers," she said.
United is approaching the two-year anniversary of its bankruptcy filing on Dec. 9, 2002, and the airline continues efforts to shed costs.
The company was in court this week asking Wedoff for permission to throw out contracts with its six labor unions if the carrier cannot wring an additional $725 million in wage and benefit concessions from those workers.
Last year, the unions agreed to new, multiyear contracts that cut their pay and benefits by about $2.5 billion annually.
United, which has cut $5 billion from annual expenditures since entering Chapter 11 protection, has said it needs another $2 billion in savings if it is to emerge from bankruptcy next year.
In addition to reductions in labor costs, the airline wants to eliminate the employees' underfunded pension plans and replace them with less costly defined-contribution plans, such as a 401(k).
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To see more of the Chicago Tribune, or to subscribe to the newspaper, go to http://www.chicagotribune.com.
(c) 2004, Chicago Tribune. Distributed by Knight Ridder/Tribune Business News. For information on republishing this content, contact us at (800) 661-2511 (U.S.), (213) 237-4914 (worldwide), fax (213) 237-6515, or e-mail [email protected].
A U.S. bankruptcy judge on Friday blocked efforts to seize up to 14 United jets by a group of financiers that controls about 175 aircraft, or roughly a third of the airline's fleet.
The group, represented by the Chicago-based law firm Chapman and Cutler LLP, sought to repossess up to eight Boeing 767s and six 737s on Wednesday. The move could have cost the Elk Grove Township-based airline tens of millions of dollars and played havoc with flight scheduling.
But U.S. Bankruptcy Judge Eugene Wedoff issued a temporary restraining order barring the group from seizing the planes, following a hearing called at United's request.
Another hearing on the matter is set for Dec. 15.
United, which is seeking to renegotiate its leases with creditors to lower the costs of operating its fleet, has argued that the Chapman group is violating antitrust laws by negotiating as a bloc instead of individual leaseholders.
As a bloc, they would have more power to force United to accept higher lease rates than the airline could negotiate with them individually, United contends.
"We believe the court rightly prevented this attempt to pressure United into accepting above-market rates for our aircraft leases," said Jean Medina, spokeswoman for the airline.
None of the other groups the airline owes have threatened to seize aircraft, Medina said.
"We've got agreements with all the other lessors, with the exception of those represented by this group," she said.
James Spiotto, one of the attorneys representing members of the Chapman group, did not return calls on Friday.
Earlier this year, members of the Chapman group were accused by United's unsecured creditors committee of attempting to overcharge United by about $1.1 billion for planes.
According to the lease terms, the lessors must give United notice of three business days before they reclaim planes. The airline said it was notified Wednesday night that the group planned to repossess aircraft, possibly as early as 12:01 a.m. on Dec. 1.
Once the airline was notified of the group's plans, contingency planning began to determine how to continue to meet the passenger needs during the busy holiday season with fewer aircraft, Medina said.
"We had begun looking at what we could do to accommodate our customers," she said.
United is approaching the two-year anniversary of its bankruptcy filing on Dec. 9, 2002, and the airline continues efforts to shed costs.
The company was in court this week asking Wedoff for permission to throw out contracts with its six labor unions if the carrier cannot wring an additional $725 million in wage and benefit concessions from those workers.
Last year, the unions agreed to new, multiyear contracts that cut their pay and benefits by about $2.5 billion annually.
United, which has cut $5 billion from annual expenditures since entering Chapter 11 protection, has said it needs another $2 billion in savings if it is to emerge from bankruptcy next year.
In addition to reductions in labor costs, the airline wants to eliminate the employees' underfunded pension plans and replace them with less costly defined-contribution plans, such as a 401(k).
-----
To see more of the Chicago Tribune, or to subscribe to the newspaper, go to http://www.chicagotribune.com.
(c) 2004, Chicago Tribune. Distributed by Knight Ridder/Tribune Business News. For information on republishing this content, contact us at (800) 661-2511 (U.S.), (213) 237-4914 (worldwide), fax (213) 237-6515, or e-mail [email protected].
