justApilot
Dawn Patroller
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Court approves pay package for UAL chief
by Soma Biswas
Updated 05:12 PM EST, Feb-21-2003
UAL Corp.'s United Airlines won approval Friday, Feb. 21, from a bankruptcy court judge for a million-dollar compensation package for its CEO, Glenn Tilton.
The news comes as escalating rancor between the airline and its unions is raising doubts about the course United has charted during its two-and-a-half months in bankruptcy.
"I think there are real signs that the unions are heading for a clash with management," said Jim Corridore, analyst at Standard & Poor's Investment Advisory Services.
Tilton's annual salary of $950,000 and a $3 million signing bonus have already been the target of objections by the Association of Flight Attendants.
The AFA has protested Tilton's contract since January, arguing it's too early to approve the pay package, which should be an incentive for Tilton to help turn the bankrupt air carrier around.
The AFA proposes the court should wait at least 12 months after UAL has met cash flow targets have set lenders in its debtor-in-possession loan before approving the pay plan.
Judge Eugene Wedoff of the U.S. Bankruptcy Court for the Northern District of Illinois in Chicago approved Tilton's package on Friday over the AFA's objections. Wedoff said it's not up to him, but UAL's board to determine if Tilton's package is reasonable.
The AFA noted at the hearing that 2,000 flight attendants had lost their jobs since UAL filed for bankruptcy on Dec. 9, and the remainder had taken voluntary wage reductions. The union asked for "shared sacrifice" between labor and management.
The AFA released an angry protest letter in reaction to UAL management's latest cost cut proposal two weeks ago. The union blasted the $34 million in new wage cuts UAL seeks as putting most of the labor savings burden on its workers, who are the lowest paid.
The AFA also said that United's plan to slim down into a new low-cost carrier would eliminate 30% of the flights in its primary hub-and-spoke operation.
The airline's two other big unions, the Air Line Pilots Association and the International Association of Machinists, sit on UAL's unsecured creditors committee with the AFA. All three groups are scrutinizing UAL's compensation for advisers Rothschild Inc. and McKinsey & Co.
The unsecured creditors' committee objected to a $15 million "completion" fee in Rothschild's compensation package. It has also argued that the court shouldn't approve payments for McKinsey until UAL hands over more data to help the unsecured creditors' committee assess what McKinsey is contributing. The unsecureds never objected to the hiring of either firm.
A recent report from a J.P. Morgan analyst that speculated on how aerospace shares would suffer if UAL liquidates, heightened the worry over the world's second largest airline last week.
UAL, meanwhile, has had to raise the interest rates on $1.5 billion of DIP loans to win backing from financial institutions.
An official with one of the lead banks said that the loan syndication was completed last week, but an UAL spokesman couldn't confirm that.
UAL raised the interest rate on the $400 million term loan portion of $1.2 billion of the DIP that was syndicated by J.P. Morgan, Citicorp Inc., Bank One Corp. and CIT Group Inc., to LIBOR plus 650 basis points, a debt analyst said.
The interest on the other $800 million was unchanged to LIBOR plus 450 basis points.
On Feb. 21, UAL received court approval to raise the rate on the stand-alone $300 million DIP its getting from Bank One.
The $1.2 billion portion of the DIP does not require court approval for higher interest rates.
Court approves pay package for UAL chief
by Soma Biswas
Updated 05:12 PM EST, Feb-21-2003
UAL Corp.'s United Airlines won approval Friday, Feb. 21, from a bankruptcy court judge for a million-dollar compensation package for its CEO, Glenn Tilton.
The news comes as escalating rancor between the airline and its unions is raising doubts about the course United has charted during its two-and-a-half months in bankruptcy.
"I think there are real signs that the unions are heading for a clash with management," said Jim Corridore, analyst at Standard & Poor's Investment Advisory Services.
Tilton's annual salary of $950,000 and a $3 million signing bonus have already been the target of objections by the Association of Flight Attendants.
The AFA has protested Tilton's contract since January, arguing it's too early to approve the pay package, which should be an incentive for Tilton to help turn the bankrupt air carrier around.
The AFA proposes the court should wait at least 12 months after UAL has met cash flow targets have set lenders in its debtor-in-possession loan before approving the pay plan.
Judge Eugene Wedoff of the U.S. Bankruptcy Court for the Northern District of Illinois in Chicago approved Tilton's package on Friday over the AFA's objections. Wedoff said it's not up to him, but UAL's board to determine if Tilton's package is reasonable.
The AFA noted at the hearing that 2,000 flight attendants had lost their jobs since UAL filed for bankruptcy on Dec. 9, and the remainder had taken voluntary wage reductions. The union asked for "shared sacrifice" between labor and management.
The AFA released an angry protest letter in reaction to UAL management's latest cost cut proposal two weeks ago. The union blasted the $34 million in new wage cuts UAL seeks as putting most of the labor savings burden on its workers, who are the lowest paid.
The AFA also said that United's plan to slim down into a new low-cost carrier would eliminate 30% of the flights in its primary hub-and-spoke operation.
The airline's two other big unions, the Air Line Pilots Association and the International Association of Machinists, sit on UAL's unsecured creditors committee with the AFA. All three groups are scrutinizing UAL's compensation for advisers Rothschild Inc. and McKinsey & Co.
The unsecured creditors' committee objected to a $15 million "completion" fee in Rothschild's compensation package. It has also argued that the court shouldn't approve payments for McKinsey until UAL hands over more data to help the unsecured creditors' committee assess what McKinsey is contributing. The unsecureds never objected to the hiring of either firm.
A recent report from a J.P. Morgan analyst that speculated on how aerospace shares would suffer if UAL liquidates, heightened the worry over the world's second largest airline last week.
UAL, meanwhile, has had to raise the interest rates on $1.5 billion of DIP loans to win backing from financial institutions.
An official with one of the lead banks said that the loan syndication was completed last week, but an UAL spokesman couldn't confirm that.
UAL raised the interest rate on the $400 million term loan portion of $1.2 billion of the DIP that was syndicated by J.P. Morgan, Citicorp Inc., Bank One Corp. and CIT Group Inc., to LIBOR plus 650 basis points, a debt analyst said.
The interest on the other $800 million was unchanged to LIBOR plus 450 basis points.
On Feb. 21, UAL received court approval to raise the rate on the stand-alone $300 million DIP its getting from Bank One.
The $1.2 billion portion of the DIP does not require court approval for higher interest rates.
