In a move that almost certainly means that its bankruptcy case filed in December, 2002 will extend well into 2006, United Airlines parent UAL Corp. announced Tuesday that it was delaying the filing its plan of reorganization with the U.S. Bankruptcy Court in Chicago after various interest groups in the case opposed the plan because of its overly aggressive timetable. It is symptomatic of the disheveled financial condition of the airline indurstry that a debtor-company’s creditors — as opposed to its management — are afraid to push the company out of bankruptcy too quickly. Here are previous posts that comment on the United Airlines saga.
Interestingly, United’s labor unions — one of interest groups that bears a substantial amount of responsibility for United’s bankruptcy in the first place — is largely responsible for the delay in United filing is plan and might just tip the reorganization process in such a way to strap United when it emerges from bankruptcy. Over the past few months, a number of private-equity firms and hedge funds have expressed interest in participating in the airline’s refinancing. However, the unions — which are among United’s largest unsecured creditors — prefer not to give up the equity in a reorganized United necessary to attract such private capital. Rather, the unions support a plan that would leverage the reorganized company with debt that would be used to pay a portion of unsecured creditors’ claims. Not surprisingly, United must overcome more than a little skepticism among institutional lenders that it is a prudent investment to risk loaning money to a highly-leveraged carrier coming out of bankruptcy and attempting to compete in the fiercely competitive airline industry.