Posted on: Thursday, August 12, 2004
Union seeks to have bankruptcy trustee appointed for UAL
By Herbert G. McCann
Associated Press
CHICAGO — The International Association of Machinists and Aerospace Workers, claiming that United Airlines executives have lost employees' trust, filed a motion in U.S. Bankruptcy Court yesterday asking a judge to appoint a trustee to oversee the airline's operations while it is in bankruptcy.
Although analysts say the machinists' motion is not likely to succeed, it could result in the eventual removal of United's current management and — in the most extreme scenario — eventual liquidation.
The union's action comes a week after United's parent, UAL Corp., asked U.S. Bankruptcy Judge Eugene Wedoff to give the Elk Grove Village-based airline the sole right to submit a plan to exit bankruptcy through Dec. 31. Currently, creditors aren't allowed to offer competing proposals to bring the airline out of bankruptcy until Aug. 30.
Machinists union officials say they are hoping their motion will result in United getting the proper leadership that will bring it out of bankruptcy protection and return it to profitability.
"United's employees, creditors and customers deserve management that will operate effectively and within the boundaries of law," said Randy Canale, president of IAM District 141. "The immediate appointment of a trustee is essential to the recovery of United Airlines."
A United spokesman said the union's motion was not helpful.
"No amount of highly charged rhetoric and baseless legal filings will make the difficult issues standing between United and (bankruptcy) exit disappear," UAL spokesman Rich Nelson said.
"The strategy to exit bankruptcy should be pretty simple," said Tom Rodenhauser, president of New Hampshire-based Consulting Information Services. "The fact United hasn't announced a strategy either means they haven't come up with a strategy, or they are rejecting the strategy its consultants have come up with. I suspect it's the latter."
Machinist union vice president Robert Roach said no airline can exit Chapter 11 successfully without employee support.
"This management team has placed UAL on a collision course with disaster," Roach said.
United has been in bankruptcy proceedings for 20 months.
Bill Brandt, president of Development Specialists Inc., a Chicago-based restructuring and management consulting firm, said the machinists' motion shows how bitter feelings have become between management and labor. The filing will serve as a catalyst to focus more attention on the management team.
"They are safe for now," Brandt said of management. "If others join in, then the viewpoint of the judge and other constituencies will begin to change."
Wedoff has set a Sept. 10 deadline for interested parties to file objections to the machinists' motion. He has scheduled oral arguments for Sept. 17.
Association of Flight Attendants spokeswoman Sara Nelson Dela Cruz said her union found the machinists union's motion appropriate, considering management's failure to come up with a bankruptcy exit plan and to finance the employee's pension plan.
"The employees of United have been committed to United's successful reorganization," Dela Cruz said. "We have proven that through three concessionary agreements that resulted in $2.56 billion average annual labor savings."
She said her union is considering whether to file a motion backing the machinists.
Last month, UAL announced it wouldn't make pension payments while it is in bankruptcy. The carrier had been scheduled to make more than $4 billion in required payments to the pension plan through 2008, including $725 million for 2004.
