Creditors blast latest payday included in updated reorg plan

(Crain's) — Creditors of United Airlines want a Chicago Bankruptcy Court to bar the carrier from giving stock worth about $100 million to managers and salaried employees as it exits bankruptcy.

The $100 million award is in addition to the $285 million in stock incentives that United plans to give its top managers and directors when it emerges from Chapter 11 next year.

The reorganization plan filed by the nation’s #2 carrier grants the airline’s management a $1 billion claim, which will be converted into $40 million to $80 million in stock in the reorganized airline. United also plans to issue its white-collar workers a $56 million note convertible into stock.

Although the airline’s unions have negotiated similar deals to offset lost wages, the airline’s executives have no legal right to this payout since they are at-will employees whose salaries and benefits aren’t guaranteed, says the creditors committee in a court filing today. Furthermore, United’s salaried and management employees — about 15% of its 58,000-person workforce — never filed an unsecured claim against the airline.

“[T]he Plan is not a platform to give gifts to non-creditors to the detriment of bona fide unsecured creditors,” the creditors wrote.

United's stock distributions to the unions in the new collective bargaining agreements reflect the salary and benefits given up by each employee group, responds Jean Medina, a United spokeswoman.

"The amounts to be received are in direct proportion to the amount of the labor cost savings contributed by each group. Because salaried and management employees also fully contributed their share of savings, United has proposed that they also should participate portionately in the equity distribution."

The $100 million award is in addition to the $285 million in stock incentives that United plans to give its top managers and directors when it emerges from Chapter 11 next year. In a court filing last week, the creditors committee criticized the Elk Grove Township-based airline for not providing details of how it plans to divvy up the stock grant to individual employees.

That perk was also blasted by a group representing United’s retired pilots, in a court filing today. “United’s proposed plan of reorganization should not be approved in its current form because the Director and Management Plans give United’s board of directors unfettered license to convert the sacrifices of labor into a reward for a few select company insiders,” said the objection filed by the United Retired Pilots Benefit Protection Association.