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Watch the trailer at: http://www.foxsearchlight.com/sideways/index_nyt.html \----------------------------------------------------------/ United Air Creditors Oppose Deal With Pilots January 5, 2005 By MICHELINE MAYNARD and MARY WILLIAMS WALSH In a bitter split, United Airlines' creditors, along with some banks and unions, have joined the federal government in opposing a deal in which United would terminate its pilots' pension plan and offer the pilots equity in the airline and other sweeteners in exchange. The showdown will come in a federal bankruptcy court in Chicago tomorrow, as the pilots are set to finish voting on the deal, which United reached with the union leadership last month. On Friday, United, the operating unit of UAL Corporation, is set to begin a tumultuous court battle to set aside virtually all of its labor contracts, impose stringent new terms and terminate all of its employee retirement programs, including the one for the pilots. Among those making the company's case Friday will be its chief executive, Glenn F. Tilton. The United situation has riveted the airline industry, in part because of a decision last week by the federal agency, the Pension Guaranty Benefit Corporation, to seize the pilots' pension plan, rather than see its unfunded burden increase. It also has implications for unions at other airlines, which could seek similar cuts if United is successful. "This is one of the largest airlines, and it's one that everybody is watching," said Gary M. Ford, a former general counsel at the pension agency who is a partner at the Groom Law Group in Washington. "It is going to set some ground rules" for other airlines. United, the second-biggest airline behind American, sought bankruptcy protection in December 2002. It hoped to reorganize with a package of federally guaranteed loans. But the Air Transportation Stabilization Board rejected its application last June, forcing the airline to intensify its efforts to cut costs. United, which had already cut its labor costs by $2.5 billion a year through an initial round of concessions, told its unions last fall that it needed another $725 million in cuts. It asked the bankruptcy court to void the contracts of unions with which it had not reached agreement on wage and benefit cuts. It also said it wanted to terminate four employee pension plans covering pilots, flight attendants, mechanics and agents. Terminating a pension plan in bankruptcy is a difficult process that requires the company to get the consent of any affected unions - something unions are generally loath to give. The deal that United struck with its pilots in December was an effort to set the terms under which the pilots would have consented to the demise of the pension plan. The tentative agreement would impose a 15 percent wage cut, sweetened by a promise by the airline that, if the pilots' plan was terminated, United would give the pilots $550 million in convertible notes when it reorganized. Another provision calls for a separate retirement plan that would not be terminated. The deal was immediately denounced by other unions, angered at what they viewed as an attempt to force them to abandon their pension plans. Meanwhile, the pension agency, which guarantees the nation's pension plans, took legal action to block the arrangements in two different courts. Separately, the agency filed a complaint in federal district court in Chicago, asking the court to terminate the pilots' plan immediately and appoint it trustee. United has not yet responded to the pension agency's complaint in district court. The pilots' union is urging its 6,400 members at United to approve the plan. Yesterday, Mr. Tilton told employees in a recorded message that the agreement was the kind of "collaborative solution" that United needed to become successful. But in a brief filed with the bankruptcy court, lawyers for the creditors' committee said the deal with the pilots could make it more difficult for United to attract the $2 billion to $2.5 billion in financing that it needs to leave bankruptcy protection, since it would give equity to the pilots. The creditors' opposition to the pilots' deal is likely to bolster the efforts by the pension agency, which generally finds itself alone in such cases, Mr. Ford, the pension agency's former general counsel, said. http://www.nytimes.com/2005/01/05/business/05air.html?ex=1105933839&ei=1&en=0d329a6eeebfa6cf --------------------------------- Get Home Delivery of The New York Times Newspaper. Imagine reading The New York Times any time & anywhere you like! Leisurely catch up on events & expand your horizons. 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