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Union Blasts United Airlines

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AP
A day after saying it will most likely terminate its employee pension funds, United Airlines will be explaining itself at a bankruptcy court hearing, lobbying for a financing deal and an extension on drawing up its own plan for the future.

The judge at U.S. Bankruptcy Court in Chicago will be asked to consider two issues: approval of a dramatically larger financing deal, and, an extension in the amount of time United has to submit a reorganization plan.

Right now, according to the Wall Street Journal, United execs have only until August 30th to turn in a plan for the future of the company. Missing the deadline would then open up the airline to any number of ideas - as its creditors and other interested parties would be allowed to submit their own plans to bankruptcy court for approval.

The question of whether and how United might emerge from bankruptcy was part of the airline's reasoning in its statement Thursday that it might have to terminate the pension funds so that it will be able to get back on its feet financially.

Such a default would be the largest by a U.S. company and would affect about 119,000 workers and retirees covered by four pension plans.

The disclosure, in bankruptcy court papers released Thursday, confirmed the fears of unions that had already gone to court in July to fight United's decision to halt pension contributions while in bankruptcy.

In a 26-page court filing, the nation's second-largest carrier cited dismal financial conditions and the need to improve its prospects of landing bankruptcy exit financing as its reasons.

"United remains willing to consider any alternative to pension termination," the airline added. "But the undisputed facts as of now paint a stark picture that United and this court cannot ignore."

Cash-strapped United faces half a billion dollars in pension contributions in the next two months and $4.1 billion by the end of 2008.

The government recently rejected the Elk Grove Village-based carrier's bid for a $1.6 billion loan guarantee. The airline also faces a jump in jet fuel prices, expected to cost it $1 billion more than anticipated in 2004 alone.

Unions have bitterly opposed halting pension contributions. United employees have already been dealt steep wage and benefit cuts during the airline's restructuring, and other financially ailing carriers are also watching United's moves closely as they consider their options as spiraling fuel costs worsen huge losses.

International Association of Machinists' union spokesman Joseph Tiberi said United's latest filing came as no surprise.

"Although they never disclosed it, their decision to stop funding the pension plans was a clear indication that they had no intention of keeping those plans active," he said.

Greg Davidowitch, head of the union representing United flight attendants, reiterated its criticism over United's handling of the pension situation.

"United is a one trick pony in its incessant return to labor for relief without exhausting, or even attempting to exhaust, other alternatives," he said. "The only twist with current management's latest attack on employee pensions is that instead of pursuing labor cost cuts through available legal means, management now pursues cuts through an unlawful course of conduct."

United's pension plans currently are underfunded by about $8.3 billion. If the company scraps the funds, that would dump $6.4 billion of that funding responsibility onto the government-financed Pension Benefit Guaranty Corp., which is already operating at a steep deficit.

The PBGC already has accused United of violating federal law by cutting off contributions while in bankruptcy.

United said it is neither violating bankruptcy law nor breaching its obligations by skipping pension contributions.

United's parent, UAL Corp., filed for Chapter 11 bankruptcy in December 2002 after billions of dollars in losses. It has not been profitable in more than four years.