The Great Money Grab

Page updated: January 13, 2006

AFA Objects to United's Plan of Reorganization

United claimed in the beginning of the bankruptcy that the reorganization depends upon the "the fair treatment of employees." Management promised to "equitably share the pain of United's restructuring." Unfortunately, the record reflects an entirely different reality. MEC President Letter (Jan 6)

We filed an objection to United's Plan of Reorganization due to:

  1. Proposed additional bonus program (Management Equity Incentive Plan)
  2. Management's attempt to include a reservation of rights to reject our Collective Bargaining Agreement after exit from bankruptcy.

Management Equity Incentive Plan (MEIP)

money grabbersIn its Plan of Reorganization (POR), United has included a lavish bonus program for distribution of equity upon exit from bankruptcy for 400 unnamed members of management.  The Management Equity Incentive Plan (MEIP) PDF icon, as set out in the Settlement with the Creditors Committee, comprises 8% of the total equity distributed amongst all creditors, including Flight Attendants and other employees.

Although every other United employee is obligated to work under four additional years of concessions following the date of exit from bankruptcy, 400 members of management stand to cash in on millions of dollars when United exits bankruptcy.  The bonus would be awarded regardless of their past or future performance.  This is purely a reward for not giving up their employment during the bankruptcy – something they had already been handsomely rewarded for through millions of dollars in Key Employee Retention Program (KERP) bonuses.

Read AFA’s Objection to MEIP and attend United’s Plan of Reorganization Confirmation Hearings January 18-20, 2006 in the Chicago Bankruptcy Court where the MEIP will be confirmed or denied by the Bankruptcy Court.

Key Employee Retention Program (more about KERP)

NY Times: “Boss to Workers: A Dollar for You, and $431 for Me”

During the bankruptcy, United management filed for three different Key Employee Retention Programs (KERP) which were billed as programs to keep certain management employees from leaving United during the bankruptcy.  AFA fought each of the filings in the bankruptcy court and succeeded in obtaining a limit to the bonus amounts, although the court ultimately approved each of the bonus programs.  Management received bonuses shortly after the approval of these programs and will receive the rest of these bonuses upon exit from bankruptcy.  In total over $35 million dollars has been and will be paid to select members of management – many of whom are responsible for bringing United into bankruptcy. 

AFA's Objection to the Third KERP:

Success Sharing Program

See: Tilton's Compensation Scandal

Management proclaimed that all employees would equally share in United’s success through the Success Sharing Program.  According to certain goals set by management and approved by United’s Board of Directors, including intent to repurchase, on-time performance and financial goals, every employee would receive a payment if such goals were met.  This program was meant to be implemented in the spirit of shared sacrifice and shared success – and was intended to tie performance to pay.

However, Tilton and his suite of senior executives have received a bonus equaling 40% of their base salary that has continued to increase year over year throughout the bankruptcy.  This meant that Tilton’s 2004 compensation came to a total of $1.2 million, well over twice the average CEO pay for the industry including pay for American Airlines CEO Gerard Arpey.  (Executive Compensation Chart for 2004)

When management did not receive their Success Sharing bonuses for financial goals in 2004, the criteria was changed in 2005 to exclude the price of fuel.  As management blamed fuel for additional employee concessions and pension plan terminations, their bonuses were protected with the exclusion of the airline’s expense for fuel.

Supporting Documents Discussed Above

KERP bag of money


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