This article from NYTimes.com has been sent to you by psa188@xxxxxxxxx War Complicates United's Bankruptcy Strategy March 12, 2003 By MICHELINE MAYNARD United Airlines asked a bankruptcy court judge yesterday for six more months to file its restructuring plan, saying it needed the additional time to sort out the complexities of a strategy that will include a new low-fare carrier and significant cuts in wages and benefits for its employees. The UAL Corporation, the parent of United, now faces an April 8 deadline for submitting its proposal. If the judge approves the extension, the company will have until Oct. 6 to make its filing, although company officials expect the plan to be ready well before then. The extra time would give United, which filed for bankruptcy in Chicago on Dec. 9, the chance to gauge the consequences of any war with Iraq on the airline industry. The Air Transport Association, which represents the major carriers, said in a report yesterday that a long conflict could prompt the industry to cut 70,000 more jobs, on top of 100,000 lost since the Sept. 11 attacks in 2001. It said several carriers could be forced into bankruptcy along with United and US Airways, which filed for Chapter 11 protection last summer. The most likely candidate is American Airlines, which has begun seeking up to $2 billion in debtor-in-possession financing should it have to file Chapter 11. In court papers filed electronically yesterday, United said it sought the extension "to avoid premature formulation of a Chapter 11 plan and to ensure that the formulated plan takes into account the interests" of the company, its employees and its creditors. United's request is scheduled to be heard March 21 in Chicago. Under bankruptcy law, a company's management has the sole right for 120 days after a Chapter 11 filing to present a restructuring plan and can request additional time. United's chief executive, Glenn F. Tilton, is preparing a restructuring plan that calls for it to shift 30 percent of its capacity to a new low-fare airline, code-named Starfish, which is intended to compete with Southwest Airlines and JetBlue. The airline will operate under different labor contracts, paying less in wages and benefits than United does. The plan has upset United's unions, which have been negotiating with the airline on $2.56 billion in concessions that United contends are necessary to become viable. In recent weeks, unions have sought proposals from outside investors, including the Texas Pacific Group, the Houston investment firm best known for leading turnarounds at Continental and America West. Under the draft proposal by Texas Pacific, employees would still have to grant deep concessions, but Mr. Tilton and other executives would be replaced and United would focus on streamlining its routes instead of establishing the low-fare carrier. But that plan is in flux, and United's creditors' committee, whose approval would be critical, has not signed off on it, nor has Texas Pacific decided whether to make a bid. Moreover, United's request for an extension could thwart such efforts, at least in the short term. Bankruptcy experts said an outsider's best chance would be to oppose United's request and present an alternative proposal at the same time. Otherwise, potential investors would have to wait until United's restructuring plan is ready, then persuade the judge that their plan is more sound. A spokesman for Texas Pacific and a lawyer for the creditors' committee did not comment yesterday. In the meantime, talks continued between United and its unions, which before the bankruptcy filing owned 55 percent of the carrier, had three seats on the board and veto power over management appointments. On Friday, United said that employee ownership of the company had fallen below 20 percent, activating a sunset clause that eliminated the employees' control. Next Monday, the airline will be able to file a motion in bankruptcy court to cancel its labor agreements if negotiations do not result in a deal on concessions. David Gregory, a labor law professor at St. John's University Law School, said both sides had to focus on the negotiations despite their efforts to find an alternative bidder. Otherwise, the court could look askance on United's request for more time, and for a potential union challenge, should one take place later on. "Neither party can use any alternative as an excuse to walk from good faith bargaining," Professor Gregory said. United's situation is just one aspect of an increasingly bleak outlook for the airline industry, which is expected to lose more than $6 billion this year without a war. If a conflict occurs, the Air Transport Association report said the carriers could lose as much as $10.7 billion. The airline industry has been lobbying members of Congress for emergency aid to offset an expected increase in fuel prices and a drop in air traffic. The report yesterday predicted that travel would fall by 15 percent if a war lasted for three months, resulting in job losses and a reduction of 2,200 flights, many to small and midsize communities. Kevin P. Mitchell, president of the Business Travel Coalition, which represents corporate travel departments and business travelers, said that travelers were rattled by the prospect of terrorist attacks at home and that even a short war in Iraq would not calm their nerves. "The first gulf war was clean; we kicked them out of Kuwait and travel rebounded," Mr. Mitchell said. "But here you've got the combination of war and anti-American sentiment. This time around, travelers are going to continue to be nervous." http://www.nytimes.com/2003/03/12/business/12AIR.html?ex=1048478791&ei=1&en=8c13273d05b2181d HOW TO ADVERTISE --------------------------------- For information on advertising in e-mail newsletters or other creative advertising opportunities with The New York Times on the Web, please contact onlinesales@xxxxxxxxxxx or visit our online media kit at http://www.nytimes.com/adinfo For general information about NYTimes.com, write to help@xxxxxxxxxxxx Copyright 2002 The New York Times Company