This information is no longer current - it is for reference only. It is an archive review of events that took place during United Airline's Chapter 11 Bankruptcy from December 9, 2002 - February 1, 2006.
Review of Two Years of Bankruptcy
August – November 2002
In effort to avoid bankruptcy, United Unions negotiate $5 billion in cost savings over 5-and-a-half year Recovery Agreement plan. Flight Attendants ratify $412 million in Contract changes as part of savings over life of plan.
December 4-9, 2002
ATSB denies United’s application for loan guarantee. Recovery Agreement, conditioned on ATSB loan guarantee, never takes effect. United files for bankruptcy.
December 16, 2002
Management meets with all Unions to explain that the company needs $2.5 billion in annual labor concessions for reorganization in connection with the bankruptcy.
January 1, 2003 – Bankruptcy Code Section 1113(e)
Flight Attendants ratify 9% pay cut as part of emergency interim wage relief demanded by management of all labor groups. Section 1113(e) permits such relief if “essential to the continued operation of the company.” The IAM Districts 141 and 141-M refused a consensual agreement for a 13% “emergency” wage cut and the court subsequently imposed a wage cut of 14%. Temporary relief to remain in place while discussions continue over management’s long-term cost cutting proposals. Management informed AFA that the company’s target for Flight Attendant concessions was $314 million annually.
February 21, 2003 – AFA Objects in Court to Management Bonuses
In the midst of discussions with AFA and other Unions over the company’s concession demands, management requests Court approval for first “Key Employee Retention Program (KERP)” for unlimited millions of dollars in management bonuses. AFA files formal objection with the Bankruptcy Court, resulting in a significant reduction of the total expenditure on KERP bonuses, and the total number of management employees receiving the $20.7 million in bonuses.
Flight Attendants ratified nearly $2 billion in cost savings over six years, effective May 1, 2003 designed to help the company return to profitability.
Flight Attendants ratified nearly $2 billion in cost savings over six years, effective May 1, 2003 designed to help the company return to profitability.
May 1, 2003 – Bankruptcy Code Section 1113(c)
Flight Attendants ratified nearly $2 billion in cost savings over six years, effective May 1, 2003 designed to help the company return to profitability. Flight Attendants approve very significant cuts in wages, work rules, healthcare and pensions. Pension modifications account for $270 million of cost savings. Future retiree health care is dramatically changed, increasing costs by a multiple of ten immediately and no cap on future costs. Management provides window until July 1, 2003 to retire with previous healthcare. Other labor groups approve similar Contract changes.
June 20, 2003 – Bankruptcy Omnibus Hearing
United Bankruptcy attorney stated, “the work done to date has put the Company in a position to move forward towards planning for its ultimate exit from Chapter 11…the Company right now is beginning to point towards a planning for exit in the fourth quarter of ’03 or in the first quarter of ’04.”
July 1, 2003
After only 1600 Flight Attendant retirements in the history of United Airlines through the end of 2002, over 2500 Flight Attendants retired in the first six months of 2003 - the majority of whom retired in June, primarily to preserve healthcare benefits.
July 3-18, 2003 - AFA Objects in Court to Management Bonuses
Management files for $9.5 million second KERP. AFA again files formal objection with the Bankruptcy Court. The Court approves $7.5 million in bonuses for “key” technical employees.
December 18, 2003
United files supplement to application with ATSB which includes changes to retiree healthcare, but withholds the information from its own UAL BOD and from Unions.
United management announces intention to use bankruptcy code Section 1114 to slash retiree healthcare benefits.
January 16, 2004 – Bankruptcy Code Section 1114
United management announces intention to use bankruptcy code Section 1114 to slash retiree healthcare benefits.
February 20 – March 18, 2004
Court appoints examiner to investigate whether management intentionally defrauded thousands of retirees. Examiner report finds United did not intentionally defraud retirees, but also uncovers CFO Jake Brace admitted that he knew well before July 1, 2003, that the company would likely seek changes to retiree health benefits.
April 8, 2004
Following an intense lobbying effort supported by AFA legislative reps and volunteers, United Flight Attendants applaud the actions of the US Congress to provide pension funding relief that United management said would secure employee pension plans and allow United Airlines to successfully restructure.
June 10, 2004 – Bankruptcy Code Section 1114 Agreement
United gets $300 million cost savings in changes to retiree healthcare through agreement with representative of retired employees under bankruptcy code.
July 14, 2004
United Airlines announces intention to skip July 15, 2004 $72.4 million payment to employee pension plans. On July 22, 2004, AFA files Contractual grievance over the skipped Flight Attendant pension plan payment.
June 17-28, 2004 – ATSB Rejects United management’s loan guarantee application
Senior management’s second and third attempt to secure approval of the ATSB loan guarantee fails even after obtaining $2.56 billion in average annual labor savings, another $1 billion in annual non-labor savings, Congressional relief in pension funding, over $300 million in savings of retiree health care and over 18 months of front-line employees turning out industry-leading service and operational records.
July 23, 2004
United announces decision to defer all pension payments throughout the term of its DIP bankruptcy loan ending in June 2005. August omnibus bankruptcy hearing uncovers DIP loan does not prohibit pension payments.
The DOL pressed United to appoint an independent fiduciary and stated it was “flabbergasted” about management’s “blatant” move to create a "hopeless conflict of interest” in the oversight of employee pensions.
August 18, 2004 – DOL Presses for Independent Fiduciary to Oversee Pension Plans
A month before United Airlines said it would stop funding its pension plans, it quietly removed three top executives charged with protecting employees' retirement interests and named itself, a judgment-proof bankrupt corporation, the fiduciary for the plans. The DOL pressed United to appoint an independent fiduciary and stated it was “flabbergasted” about management’s “blatant” move to create a "hopeless conflict of interest” in the oversight of employee pensions. (Chicago Tribune article)
News reports had stated that Tilton refused to take a “scheduled raise” to $845,500 and instead kept his salary at a mere $712,500 – not to mention the employment contract which includes:
- $1.5 million in stock payments,
- $3 million “signing bonus,” and
- $4.5 million pension trust.
However, AFA discovered that Tilton took the raise for a period of time. Non-bankrupt American Airlines chief executive, Gerard Arpey, makes $200,000 less than Tilton and recently declined a nearly 22 percent raise offered by his company ' s board. (Full review of documentation revealing Tilton’s accepted raise is posted on our website.)
The AFA United Master Executive Council (MEC) met in special session to review the state of our airline following a long string of failures and a destructive course of action planned by United Airlines current senior management. Discussions held at Local Council meetings, a 97% vote of no confidence in senior management and on-going Membership feedback regarding bad business decisions by senior management dictated a clear and decisive course of action by AFA. The MEC concluded that there was no choice but to seek new senior management possessing the competence necessary to prepare a workable and fair business plan for the successful reorganization of our airline. The following week, AFA filed a motion in the bankruptcy court seeking to appoint a trustee to oversee the balance of United’s bankruptcy.
AFA filed a motion in the bankruptcy court seeking to appoint a trustee to oversee the balance of United’s bankruptcy.
September 17, 2004
United management publicly announces plan to cut an additional $500 million annually in labor cost on top of $655 million in job cuts and other labor cost cuts announced in late August. Management states these cuts would be over and above termination of pension plans. ( Chicago Tribune)
September 23, 2004 (Unsubstantiated Pension Brief Struck from Court Record)
On September 22, 2004, United attempted to file a 91-page “informational brief” with the Court including unsubstantiated claims about the impact on employees and retirees if the pension plans were terminated. Together with the IAM and later joined by the Pension Benefit Guaranty Corporation (PBGC), AFA filed an emergency motion with the Court, seeking to strike United Airlines ' brief from court proceedings. Bankruptcy Court Judge Eugene Wedoff granted our joint motion, ordered that the brief be removed from the docket, and ordered United Airlines to not make any further filings which do not conform to Court rules.
The unsubstantiated informational brief was stricken from the Court record, but the contents of it were reported as fact in some media articles. However, the Pension Benefit Guaranty Corporation (PBGC) stated that they dispute the figures quoted in United’s brief. Additionally, the people filing this brief were the same ones who said cutting jobs, forcing people to work longer hours for less pay with more expensive healthcare and slashing retiree healthcare wasn’t going to hurt. Clearly, and notwithstanding the information brief filed by management, Flight Attendants and other employees will be dramatically impacted by termination of their pension plans.
September 24, 2004
Thanks to AFA Government Affairs and a grass-root Member letter-writing campaign to Congress, 23 U.S. Senators and 117 U.S. Congress members signed on to a letter urging United Airlines CEO Glenn Tilton to reconsider the company’s decision to stop funding employee pension plans, putting the retirement of nearly 120,000 employees and retirees in jeopardy. The letter to Tilton underlines growing political concerns about the impact United Airlines employee pension plan terminations could have on the rest of the airline industry and ultimately on the overburdened Pension Benefit Guaranty Corporation. A portion of the lawmakers’ letter stated:
“Earlier this year, Congress took specific action to protect airline pension plans … because we believed, based upon representations by you and other airline executives, that this action was necessary to preserve the pension funds. Now, a few months later, we learn that United may end its pension obligations and jeopardize the retirement security of thousands of families in our states and districts.”
September 30, 2004
“Mr. Tilton defends the industry’s frequent recourse to the bankruptcy courts, quoted saying, ‘So long as we have to fall under the scope of the Railway Labor Act of 1926,’ he said ‘Chapter 11 is the only way to gain leverage with the unions.’” (The Economist)
October 7, 2004 (Senate Pension Hearing)
The Senate Commerce Committee conducted a hearing to examine the impact of Federal Pension and Bankruptcy Policy on the financial health of the airlines. Bradley Belt, PBGC Executive Director, told the committee, the “longer-term solvency of the pension insurance program … is at risk. Simply put, companies should be held accountable to make good on the pension promises they have made to their workers and retirees. The consequences of not honoring these commitments are unacceptable- the retirement security of millions of current and future retirees is put at risk.” The combination of several U.S. airlines in or facing bankruptcy and considering terminating under-funded pensions presents a significant threat to the PBGC and if it continues, will more than likely result in a tax-payer bailout to rival the infamous Savings and Loan crisis.
Also discussed was a responsibility of the government to look at what it can do to cut fuel costs; as windfall profits were being made in the oil industry on the backs of employee pension plans; although this idea was not met with a great amount of optimism. Among the most outspoken of the participants Senator Fitzgerald (R-IL) again questioned the coincidental nature of United Airlines saving $500M by terminating employee pension plans, and spending $500M on the O’Hare expansion project, annually.
October 8, 2004 (Pension Fairness Act, 2004)
Representative George Miller (D-CA), introduced legislation to prohibit companies that dump their employees’ under-funded pension plans from also contributing to executive retirement plans. The Act would prohibit paying or promising deferred compensation to directors and officers for a 5-year period should a company terminate its employee pension plans during Chapter 11 or reducing employee pension benefits by switching to “cash balance” retirement plans. The prohibition would begin on the date of any notice of intent to terminate or date of adoption of a cash balance amendment (with a one year look-back to prevent trickery by executives).
October 15, 2004 (Bankruptcy Omnibus Hearing)
United announced in Court that it would seek additional cost cutting through Section 1113 of the Bankruptcy Code in an effort to put employee concessions in place by January of 2005. The company’s exploitation of the bankruptcy process for additional concessions came as no surprise after months of hearing Glenn Tilton and Pete McDonald say that our previous concessions are “not enough” and warning that we will need to “dig deeper.”
Since the filing for the appointment of a trustee to oversee United Airlines’ development of a viable business plan, the Creditors Committee has organized several working groups, consisting of principals and consultants of the Committee. Working groups were created to focus on various aspects of United’s restructuring including the development of a business plan. Additionally, an agreement was reached between AFA, the IAM and the company which directly deals with the core issue raised in our trustee motion – the direction and future of United. The court approved the retention of Bridge Associates LLC, to conduct an independent evaluation of United’s business plan. Over a thirty day period in the month of November, Bridge Associates would examine the business plan and provide a confidential written report to AFA, the IAM and United. As part of this agreement, AFA and the IAM withdrew the motion for a trustee without prejudice.
United presents to AFA its list of demands for concessions through a Section 1113(c) term sheet.
November 4, 2004 (United Presents Section 1113(c) term sheet demands to Unions)
United presents to AFA its list of demands for concessions through a Section 1113(c) term sheet. The company seeks an additional $725 million annually in concessions from all labor groups, and details that nearly $138 million is allocated for Flight Attendant concessions. The term sheet also demands agreement from labor for termination of the Defined Benefit Pension Plans. Management threatens employees through NewsReal and states that if they do not get the concessions, “ the company will ask the Court for permission to reject the collective bargaining agreements so that the necessary changes can be implemented.” In an attempt to divide pensions from concessions, Glenn Tilton states that “one third of these savings will come from non-labor cost reductions, one third will come from pension replacements and one third will come from labor costs” when referring to $2 Billion sought in annual cost reductions.
November 13, 2004 (United Airlines CHAOS™ Strike Preparations)
After reviewing United’s demands and the state of our airline, the United Master Executive Council determined that United management is intent on exploiting the 1113(c) process to achieve what it desires rather than what it needs. Notwithstanding management’s conduct, AFA will meet with United management to fulfill our obligations under Section 1113(c) of the Bankruptcy Code. We will take all actions necessary to prevent United management from destroying our careers and extracting from the Flight Attendants a single dime more than the law permits. Still, AFA believes that management will remain fixed upon a strategy of overreaching, will not negotiate in good faith and will seek judicial intervention to achieve its unnecessary, unfair and inequitable goals. Therefore, the United Master Executive Council resolved to immediately begin all necessary preparations, including issuing a CHAOS strike ballot to the Membership.
November 16, 2004 (World-Wide Flight Attendant Strike Resolution)
The AFA Board of Directors, representing Flight Attendants at 26 carriers, unanimously resolved to conduct a world-wide CHAOS strike if any AFA Flight Attendant Contract is rejected in a bankruptcy court and called all non-AFA flight attendants, and all airline employees, regardless of job category and airline, to join us in solidarity with our strike to prevent the destruction of our careers and our industry.
November 18, 2004
American Airlines Flight Attendants’ Union, the Association of Professional Flight Attendants (APFA), issues a statement of full support for AFA strike preparations. Southwest Airlines Flight Attendants’ Union, Transport Workers’ Union Local 556, issued a statement of full support two days later.
November 24, 2004
Late on the evening prior to the Thanksgiving holiday, United bankruptcy attorneys file a Section 1113(c) motion to reject 6 labor Contracts if by January management fails to extract an additional $725 million in annual labor concessions.
November 30, 2004
Independent Fiduciary Services, which operates as the trustee for United Airlines ' employee pension plans filed a motion in the bankruptcy court. The motion seeks to classify the unpaid pension contributions at a higher priority as "administrative expenses,” requiring the airline to contribute to the plans before exiting bankruptcy.
December 1, 2004
Section 1113(c) talks with the company stalled as the Financial Review Committee discovers that United’s demands for the additional 4% wage reduction from December 31, 2004 to a period ending up to six months after our exit from bankruptcy is in addition to the $138 million and the termination of our Flight Attendant Defined Benefit Pension Plan.
December 2, 2004
CHAOS Strike Ballots mailed to Members for approval of strike action if United management achieves bankruptcy court rejection of the United Flight Attendant Contract.
December 3, 2004
The United Master Executive Council met in special session to review a confidential draft report on United's business plan, prepared by an independent restructuring firm, Bridge Associates. Court order prohibits discussion or reproduction of this report. The United Master Executive Council will continue to fully utilize all available information related to United's bankruptcy to best determine our course of action in protecting Flight Attendant jobs and the successful restructuring of our airline.
December 6, 2004
CHAOS Strike Ballots begin to arrive at Members' homes.
December 7, 2004
Discussions resume in connection with the company’s demands for additional concessions.
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