================================================================= UNITED AIRLINES BANKRUPTCY NEWS Issue Number 1 ----------------------------------------------------------------- Copyright 2002 (ISSN XXXX-XXXX) December 9, 2002 ----------------------------------------------------------------- Bankruptcy Creditors' Service, Inc. 609-392-0900 FAX 609-392-0040 ----------------------------------------------------------------- UNITED AIRLINES BANKRUPTCY NEWS is published by Bankruptcy Creditors' Service, Inc., 24 Perdicaris Place, Trenton, New Jersey 08618, on an ad hoc basis (generally every 10 to 20 days) as significant activity occurs in the Debtors' cases. New issues are prepared by Geoff J. Bailey, Frauline Sinson-Abangan, and Peter A. Chapman, Editors. Subscription rate is US$45 per issue. Any re-mailing of UNITED AIRLINES BANKRUPTCY NEWS is prohibited. ================================================================= IN THIS ISSUE ------------- [00000] HOW TO SUBSCRIBE TO UNITED AIRLINES BANKRUPTCY NEWS [00001] BACKGROUND & DESCRIPTION OF UAL CORP. & UNITED AIRLINES [00002] COMPANY'S CONSOLIDATED BALANCE SHEET AT SEPT. 30, 2002 [00003] COMPANY'S PRESS RELEASE CONCERNING CHAPTER 11 FILING [00004] UNITED AIRLINES DEBTORS' CHAPTER 11 DATABASE [00005] LIST OF THE DEBTORS' LARGEST UNSECURED CREDITORS [00006] DEBTORS' MOTION FOR JOINT ADMINISTRATION OF CASES [00007] DEBTORS' MOTION TO GET $300MM DIP FINANCING FROM BANK ONE [00008] DEBTORS' MOTION TO OBTAIN $1.2 BILLION OF DIP FINANCING [00009] UAL EXECUTIVE WAGE CUTS TO TAKE EFFECT NEXT WEEK [00010] AIRLINE PILOTS ASSOC. PRESIDENT CHIDES ATSB & WHITE HOUSE [00011] FLIGHT ATTENDANTS VOW TO RESTORE UNITED'S NO. 1 POSITION [00012] TRAVEL AGENTS' ASSOCIATION GIVES PASSENGER TIPS [00013] AIR LINE PILOTS ASSOC. SAYS PILOTS WILL CONTINUE FLYING [00014] NYSE REVIEWING CONTINUED LISTING OF UAL SHARES KEY DATE CALENDAR ----------------- 12/09/02 Petition Date 12/24/02 Deadline for filing Schedules of Assets and Liabilities 12/24/02 Deadline for filing Statement of Financial Affairs 12/24/02 Deadline for filing Lists of Leases and Contracts 12/29/02 Deadline to provide Utilities with adequate assurance 02/07/03 Deadline to make Sec. 1110 aircraft lease decisions 02/07/03 Deadline to make decisions about lease dispositions 03/09/03 Deadline to remove actions pursuant to F.R.B.P. 9027 04/08/03 Expiration of Debtors' Exclusive Plan Proposal Period 06/07/03 Expiration of Debtors' Exclusive Solicitation Period 12/08/04 Deadline for Debtors' Commencement of Avoidance Actions Organizational Meeting with UST to form Committees Bar Date for filing Proofs of Claim First Meeting of Creditors pursuant to 11 USC Sec. 341 ----------------------------------------------------------------- [00000] HOW TO SUBSCRIBE TO UNITED AIRLINES BANKRUPTCY NEWS ----------------------------------------------------------------- UNITED AIRLINES BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. New issues are published on an ad hoc basis as significant activity occurs (generally every 10 to 20 days) in the Debtors' cases. The subscription rate is US$45 per issue. Newsletters are delivered via e-mail; invoices, transmitted following publication of each newsletter issue, arrive by fax. Re-mailing of UNITED AIRLINES BANKRUPTCY NEWS is prohibited. Distribution to multiple individuals at the same firm is provided at no additional charge; folks outside of your firm should set-up and pay for their own subscriptions. Subscriptions may be canceled at any time without further obligation. 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Please enter my personal subscription to UNITED AIRLINES BANKRUPTCY NEWS at US$45 per issue until I tell you to cancel my subscription. Name: ---------------------------------------------- Firm: ---------------------------------------------- Address: ---------------------------------------------- ---------------------------------------------- Phone: ---------------------------------------------- Fax: ---------------------------------------------- E-Mail: ---------------------------------------------- (Distribution to multiple professionals at the same firm is provided at no additional cost.) UNITED AIRLINES BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. New issues are published on an ad hoc basis as significant activity occurs (generally every 10 to 20 days) in the Debtors' cases. The subscription rate is US$45 per issue. Newsletters are delivered via e-mail; invoices, transmitted following publication of each newsletter issue, arrive by fax. Re-mailing of UNITED AIRLINES BANKRUPTCY NEWS is prohibited. Distribution to multiple individuals at the same firm is provided at no additional charge; folks outside of your firm should set-up and pay for their own subscriptions. Subscriptions may be canceled at any time without further obligation. ----------------------------------------------------------------- [00001] BACKGROUND & DESCRIPTION OF UAL CORP. & UNITED AIRLINES ----------------------------------------------------------------- UAL Corporation P.O. Box 66919 Chicago, Illinois 60666 Telephone (847) 700-4000 Fax (847) 700-4081 http://www.united.com UAL Corporation (NYSE:UAL), through United Air Lines, Inc., is the holding company for United Airlines -- the world's second largest air carrier. With hubs in Chicago, Denver, Los Angeles, San Francisco and Washington, D.C., and key international gateways in Tokyo, London, Frankfurt, Miami and Toronto, United carries more than 175,000 passengers per day and tons of cargo in 537 jet aircraft following nearly 1,800 daily routes to 119 destinations in 26 countries and two U.S. territories. Through Star Alliance, the leading global airline network, United's customers have access to more than 729 destinations around the world. In 2001, United carried 75 million passengers and flew 116.6 million revenue passenger miles. In the first six months of 2002, United carried 32.8 million passengers and accounted for: -- 53% of traffic in San Francisco (SFO); -- 23% at Los Angeles (LAX); -- 64% at Denver (DEN); -- 49% at Chicago O'Hare (ORD); and -- 54% at Washington Dulles (IAD). United has a complex debt structure, consisting of: $3,100,000,000 of various aircraft-backed mortgages secured by 87 aircraft; 4,000,000,000 of various aircraft-backed enhanced equipment trust certificate financings secured by 100 aircraft; 1,800,000,000 of various capital lease obligations with respect to 69 aircraft; 5,500,000,000 of various operating lease obligations with respect to 243 aircraft; 646,000,000 owed under six series of senior notes due between 2003 and 2021 issued under a 1991 Indenture between United Air Lines, Inc., and the Bank of New York; 1,700,000,000 owed under 18 special facility revenue bond facilities doe between 2011 and 2035; 97,000,000 of 13.25% Trust Originated Preferred Securities, called TOPrS; and 200,000,000 of estimated trade debt. United has 83,000 employees, 80% of which are covered by 11 collective bargaining agreements: Number Employee Subgroup Union Representative ------ ----------------- -------------------- 8,800 Pilots Air Line Pilot Association 18,000 Flight attendants Association of Flight Attendants 38,000 Public contact International Association of employees, ramp Machinists and Aerospace Workers workers and storekeepers, mechanics, food service employees, security officers, fleet technical instructors, and maintenance instructors 437 Engineers International Federation of Professional and Technical Engineers 181 Dispatchers Professional Airline Flight Control Association 21 Meteorologists Transport Workers Union SpeedNews, Inc., reports that 23,000 of United's employees are located in California and United is responsible for one of every six air transportation jobs in that state. At LAX, United occupies 17% of total gate space. ----------------------------------------------------------------- [00002] COMPANY'S CONSOLIDATED BALANCE SHEET AT SEPT. 30, 2002 ----------------------------------------------------------------- UAL Corporation and Subsidiary Companies Condensed Statements of Consolidated Financial Position At September 30, 2002 (Unaudited) Assets Current assets: Cash and cash equivalents $1,011,000,000 Restricted cash 344,000,000 Short-term investments 612,000,000 Receivables, net 1,159,000,000 Income tax receivables 326,000,000 Inventories, net 323,000,000 Prepaid expenses and other 285,000,000 --------------- 4,060,000,000 Operating property and equipment: Owned 19,579,000,000 Accumulated depreciation and amortization (5,164,000,000) --------------- 14,415,000,000 Capital leases 2,625,000,000 Accumulated amortization (502,000,000) --------------- 2,123,000,000 --------------- 16,538,000,000 Other assets: Investments 115,000,000 Intangibles, net 414,000,000 Pension assets 1,170,000,000 Aircraft lease deposits 746,000,000 Prepaid rent 361,000,000 Other, net 786,000,000 --------------- 3,592,000,000 --------------- $24,190,000,000 =============== Liabilities and Stockholders' Equity Current liabilities: Current portions of long-term debt and capital lease obligations 1,331,000,000 Advance ticket sales 1,352,000,000 Accrued salaries, wages and benefits 1,502,000,000 Accounts payable 617,000,000 Other 2,358,000,000 --------------- 7,160,000,000 Long-term debt 7,098,000,000 Long-term obligations under capital leases 1,844,000,000 Other liabilities and deferred credits: Deferred pension liability 2,250,000,000 Postretirement benefit liability 1,769,000,000 Deferred gains 755,000,000 Other 1,911,000,000 --------------- 6,685,000,000 Commitments and contingent liabilities Company-obligated mandatorily redeemable preferred securities of a subsidiary trust 97,000,000 Preferred stock committed to Supplemental ESOP 3,000,000 Stockholders' equity: Preferred stock --- Common stock at par 1,000,000 Additional capital invested 5,060,000,000 Accumulated deficit (1,946,000,000) Accumulated other comprehensive loss (335,000,000) Treasury stock (1,475,000,000) Other (2,000,000) --------------- 1,303,000,000 --------------- $24,190,000,000 =============== ----------------------------------------------------------------- [00003] COMPANY'S PRESS RELEASE CONCERNING CHAPTER 11 FILING ----------------------------------------------------------------- UAL Corp. Files For Chapter 11 Reorganization -- Company to Transform its Business through Reorganization -- Maintains Worldwide Operations and Customer Programs -- Receives Commitment for $1.5 Billion in DIP Financing CHICAGO, Illinois -- December 9, 2002 -- UAL Corp. (NYSE: UAL), the parent company of United Airlines, today announced it and certain of its U.S. subsidiaries have filed for protection under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Northern District of Illinois, Eastern Division in Chicago. The Chapter 11 process will facilitate UAL's restructuring which is designed to restore the company to long-term financial health while operating in the normal course of business. UAL said that during its Chapter 11 case, it will maintain its ability to continue its global operations and continue its long-standing commitment to its customers, safety and reliability. Chapter 11 permits a company to continue operations in the normal course while it develops a plan of reorganization to address its existing debt, capital and cost structures. Glenn F. Tilton, chairman, president and chief executive officer of UAL, said, "United Airlines will continue to provide customers with the same experience and level of service they have come to expect. We stand by our commitment to provide customers with convenient schedules, quality onboard services and the most extensive route network in the U.S. and abroad. Most importantly, throughout this process, customer safety will continue to be our number one priority. We have a solid record as a safe and reliable airline, and we intend to maintain and build upon that record." UAL stressed that it is business as usual and that current and future tickets on United flights will be honored, and United will continue to participate fully in the Star Alliance. Mileage Plus participants continue to be able to accrue and redeem mileage on United and all partner airlines. The company said that its other code-share agreements will not be affected by the filing. Red Carpet Clubs remain open and ready to serve customers. To ensure the smooth operation of the airline, the company said that it has requested relief from the bankruptcy court allowing it to, among other things, continue customer programs including Mileage Plus and Red Carpet Clubs, continue making regular and timely payments to fuel vendors, hotels and other services, obtain debtor-in-possession financing, assume clearinghouse and interline contracts and pay employee salaries, wages and benefits without interruption. UAL reported that in conjunction with its filing, it has arranged commitments for $1.5 billion in debtor-in-possession (DIP) financing. The DIP financing is structured as a $300 million facility from Bank One and a $1.2 billion facility from a group that is led by J.P. Morgan Chase and Citibank, and includes CIT Group and Bank One. Access to $700 million of the $1.2 billion facility is subject to certain terms of the facility. Such terms require that the company achieve performance milestones under its business plan, which include substantial cost savings in the near term. In addition to approximately $800 million in unrestricted cash-on-hand, the DIP financing will provide adequate liquidity to meet the anticipated needs of UAL and all of its operating units to continue normal operations throughout the Chapter 11 process. Included in the filing are UAL Corp., United Airlines, Inc. and twenty-six other direct and indirect U.S. subsidiaries. Tilton continued, "We have begun the hard work of transforming our airline, and over the last several months have made progress in responding more effectively to changes in the marketplace and reducing the size of our airline to match demand. However, at this stage, reorganization through Chapter 11 offers the best way to provide uninterrupted service to our customers around the world, safeguard the value of our businesses and assets, and, ultimately, emerge as a stronger, healthier and more competitive airline." Using Chapter 11 to Strengthen Our Future Since the tragic events of September 11, 2001 and the slowdown of the economy, United has faced significant financial and operational challenges. Changes in consumer behavior, particularly the reduction in business travel and the changes in business travel patterns, have led to a significant decline in revenues for United. Additionally, the company faced $875 million in debt maturities due during the fourth quarter of 2002. Given the changed operating environment, UAL determined that it had to implement far-reaching changes to its business to secure its position as a leading global airline. The company said that the Chapter 11 process is the best means to facilitate the implementation of necessary changes to the business to bring costs and operations in line with the new business environment. Additionally, Chapter 11 gives the company access to new capital through DIP financing not otherwise available. Over the coming months, UAL will work with its creditors, union leaders, employee groups and other stakeholders to develop a plan of reorganization that will serve as a roadmap for United's future. United's costs are among the highest in the industry and the company faces costly, restrictive work rules. The company said that it will look at every aspect of its operations - including work rules, fleet mix and routes - and make changes that will ensure United continues to be a major player in the global airline industry. The company said that although its restructuring may result in route or service changes, it is committed to remaining a full service global airline and a key member of the Star Alliance, the world's most extensive airline alliance. UAL's plan of reorganization will be filed with the court at a later date. Tilton continued, "During the Chapter 11 process, we will go further and deeper in our efforts to reduce our costs. We are developing a very compelling plan of reorganization that will enable us to successfully emerge as a stronger company with a competitive cost structure. It is our goal to complete this process within 18 months. I am confident that we can restore profitability and reestablish United as the world's premier global carrier. Our best days are ahead of us." UAL's legal counsel is Kirkland & Ellis. Rothschild Inc. is providing UAL with financial advisory services. ----------------------------------------------------------------- [00004] UNITED AIRLINES DEBTORS' CHAPTER 11 DATABASE ----------------------------------------------------------------- Debtor entities filing separate chapter 11 petitions: Case No. Debtor Entity -------- ------------- 02-48191 UAL Corporation 02-48192 UAL Loyalty Services, Inc. 02-48193 Confetti, Inc. 02-48194 Mileage Plus Holdings, Inc. 02-48195 Mileage Plus Marketing, Inc. 02-48196 MyPoints.com, Inc. 02-48197 Cybergold, Inc. 02-48198 itarget.com, inc. 02-48199 MyPoints Offline Services, Inc. 02-48200 UAL Company Services, Inc. 02-48201 Four Star Leasing, Inc. 02-48202 Air Wis Services, Inc. 02-48203 Air Wisconsin, Inc. 02-48204 Domicile Management Services, Inc. 02-48205 UAL Benefits Management, Inc. 02-48206 United BizJet Holdings, Inc. 02-48207 BizJet Charter, Inc. 02-48208 BizJet Fractional, Inc. 02-48209 BizJet Services, Inc. 02-48210 United Air Lines, Inc. 02-48211 Kion Leasing, Inc. 02-48212 Premier Meeting and Travel Services, Inc. 02-48213 United Aviation Fuels Corporation 02-48214 United Cogen, Inc. 02-48215 Mileage Plus, Inc. 02-48216 United GHS, Inc. 02-48217 United Worldwide Corporation 02-48218 United Vacations, Inc. Chapter 11 Petition Date: December 9, 2002 Bankruptcy Court: United States Bankruptcy Court Northern District of Illinois Eastern Division 219 South Dearborn Chicago, Illinois 60604 Telephone (312) 435-5694 Fax (312) 408-7750 Bankruptcy Judge: The Honorable Eugene R. Wedoff Debtors' Bankruptcy Counsel: James H.M. Sprayregen, Esq. Marc Kieselstein, Esq. David R. Seligman, Esq. Steven R. Kotarba, Esq. KIRKLAND & ELLIS Aon Center 200 East Randolph Drive Chicago, Illinois 60601 Telephone (312) 861-2000 Fax (312) 861-2200 Debtors' Restructuring Consultant: Thomas J. Allison Huron Consulting Group LLC 550 West Van Buren Street Chicago, Illinois 60607 Telephone (312) 583-8700 Fax (312) 583-8701 Debtors' Financial Advisor: David Resnick Todd Snyder Rothschild, Inc. 1251 Avenue of the Americas, 51st floor New York, New York 10020 Telephone (212) 403-3500 Fax (212) 403-3501 U.S. Trustee: Ira Bodenstein Constantine Harvalis Sandra Rasnak United States Trustee for Region 11 227 West Monroe St., Suite 3350 Chicago, Illinois 60606 Telephone (312) 886-5785 Fax (312) 886-5794 ----------------------------------------------------------------- [00005] LIST OF THE DEBTORS' LARGEST UNSECURED CREDITORS ----------------------------------------------------------------- Entity Nature Of Claim Claim Amount ------ --------------- ------------ Bank of New York Unsecured Bonds $371,000,000 101 Barclay Street, 8W 11.21% Series B New York, NY 10286 Debentures due Attn: Tom Zakrzewski May 1, 2014 Telephone (212) 815-2495 Fax (212) 815-5704 Bank of New York Unsecured Bonds $370,200,000 101 Barclay Street, 8W 10.67% Series A New York, NY 10286 Debentures due Attn: Tom Zakrzewski May 1, 2004 Telephone (212) 815-2495 Fax (212) 815-5704 Bank of New York Unsecured Bonds $300,000,000 101 Barclay Street, 8W 10.25% Debentures New York, NY 10286 due July 15, 2021 Attn: Tom Zakrzewski Telephone (212) 815-2495 Fax (212) 815-5704 Bank One Trust Unsecured Bonds $261,415,000 Mail Code INI-0152 6.875% City and 11 Monument Circle County of Denver, Indianapolis, IN 46277 CO Special Attn: John Pease Facilities Airport Telephone (317) 321-7852 Revenue Bonds, Fax (614) 244-5188 Series 1992A due October 1, 2032 Bank of New York Unsecured Bonds $250,000,000 101 Barclay Street, 8W 9.75% Debentures New York, NY 10286 due August 15, 2021 Attn: Tom Zakrzewski Telephone (212) 815-2495 Fax (212) 815-5704 Bank One Trust Unsecured Bonds $220,705,000 Mail Code INI-0152 6.50% Indianapolis 11 Monument Circle Airport Authority Indianapolis, IN 46277 Special Facility Attn: John Pease Revenue Bonds, Telephone (317) 321-7852 Series 1995A due Fax (614) 244-5188 November 15, 2031 Bank of New York Unsecured Bonds $200,000,000 101 Barclay Street, 8W 9.125% Debentures New York, NY 10286 due Jan. 15, 2012 Attn: Tom Zakrzewski Telephone (212) 815-2495 Fax (212) 815-5704 Wells Fargo Unsecured Bonds $190,240,000 MAC E28180176 5.75% California 708 Wilshire Boulevard Statewide 17th Floor Communities Los Angeles, CA 90017 Development Authority Attn: Jeanue Mar Special Facilities Telephon (213) 614-2249 Revenue Bonds Series Fax (213) 614-3355 1997 (LAX) due October 1, 2034 Indiana Dept. of Commerce Contract $162,000,000 Office of the Lt. Gov. (Contingent Claim) Indianapolis, IN 46204 Attn: Joseph E. Kerman Telephone (317) 232-8800 Fax (317) 232-4788 - and - City of Indianapolis 200 East Washington St. Room 2501 Indianapolis, IN 46204 Attn: Bart Peterson, Mayor Telephone (317) 327-2234 Fax (317) 327-3980 - and - Indianapolis Airport Authority 2500 South High School Road Box 100 Indianapolis, IN 46241 Attn: David Roberts Telephone (317) 487-9594 Fax (317) 487-5034 Wells Fargo Unsecured Bonds $154,845,000 MAC E28180176 5.70% California 708 Wilshire Boulevard Statewide 17th Floor Communities Los Angeles, CA 90017 Development Authority Attn: Jeanue Mar Special Facilities Telephon (213) 614-2249 Revenue Bonds Series Fax (213) 614-3355 1997 Series A (SFO) due October 1, 2033 Bank of New York Unsecured Bonds $150,000,000 101 Barclay Street, 8W 9.000% Notes due New York, NY 10286 December 15, 2003 Attn: Tom Zakrzewski Telephone (212) 815-2495 Fax (212) 815-5704 Bank One Trust Unsecured Bonds $149,370,000 Mail Code INI-0152 6.30% City of 11 Monument Circle Chicago Special Indianapolis, IN 46277 Facilities Revenue Attn: John Pease Refunding Bonds Telephone (317) 321-7852 Series 2001C due Fax (614) 244-5188 May 1, 2016 Bank of New York Unsecured Bonds $121,000,000 Midwest Trust Company 5.35% City of Two North LaSalle Street Chicago Special Suite 1020 Facilities Revenue Chicago, IL 60602 Refunding Bonds Attn: Daryl Pornykala Series 1999A due Telephone (312) 827-8526 September 1, 2016 Fax (312) 827-8523 Bank One Trust Unsecured Bonds $102,570,000 Mail Code INI-0152 5.80% City of 11 Monument Circle Chicago Special Indianapolis, IN 46277 Facilities Revenue Attn: John Pease Refunding Bonds Telephone (317) 321-7852 Series 2001A-1 due Fax (614) 244-5188 November 1, 2035 Bank One Trust Unsecured Bonds $100,000,000 Mail Code INI-0152 6.375% City of 11 Monument Circle Chicago Special Indianapolis, IN 46277 Facilities Revenue Attn: John Pease Refunding Bonds Telephone (317) 321-7852 Series 2001A-2 due Fax (614) 244-5188 November 1, 2035 Bank One Trust Unsecured Bonds $80,500,000 Mail Code INI-0152 5.55% Massachusetts 11 Monument Circle Port Authority Indianapolis, IN 46277 Special Facility Attn: John Pease Revenue Bonds, Telephone (317) 321-7852 Series 1999A due Fax (614) 244-5188 October 1, 2029 Bank One Trust Unsecured Bonds $49,280,000 Mail Code INI-0152 6.10% City of 11 Monument Circle Chicago Special Indianapolis, IN 46277 Facilities Revenue Attn: John Pease Refunding Bonds Telephone (317) 321-7852 Series 2001B due Fax (614) 244-5188 November 1, 2035 Airbus Trade -- Aircraft $47,632,981 198 Van Buren St. maintenance parts Suite 300 and services Herndon, VA 20170 Attn: Clyde Kizer Telephone (703) 834-3526 Fax (703) 834-3464 Bank of New York Unsecured Bonds $40,275,000 Midwest Trust Company 5.35% City of Two North LaSalle Street Chicago Special Suite 1020 Facilities Revenue Chicago, IL 60602 Refunding Bonds Attn: Daryl Pornykala Series 1999B due Telephone (312) 827-8526 April 1, 2011 Fax (312) 827-8523 U.S. Bank Trust, N.A. Unsecured Bonds $38,360,000 Trust Center 6.57% City of Chicago Corporate Trust Services Special Facilities 180 East 5th Street Revenue Refunding St. Paul, MN 55101 Bonds Series 2000A Attn: Erik Starkman due November 1, 2011 Telephone (651) 244-8884 Fax (651) 244-8884 - and - Attn: Good Ubani Telephone (651) 244-8497 Fax (651) 233-8208 Wells Fargo Unsecured Bonds $34,590,000 MAC E28180176 6.25% California 708 Wilshire Boulevard Statewide 17th Floor Communities Los Angeles, CA 90017 Development Authority Attn: Jeanue Mar Special Facilities Telephon (213) 614-2249 Revenue Bonds Series Fax (213) 614-3355 2001 (LAX) due October 1, 2035 U.S. Bank Trust, N.A. Unsecured Bonds $34,390,000 Trust Center 6.875% Facilities Corporate Trust Services Lease Refunding 180 East 5th Street Revenue Bonds St. Paul, MN 55101 Issue 1992 (LAX) Attn: Erik Starkman Telephone (651) 244-8884 Fax (651) 244-8884 - and - Attn: Good Ubani Telephone (651) 244-8497 Fax (651) 233-8208 U.S. Bank Trust, N.A. Unsecured Bonds $34,235,000 Trust Center 5.65% New York City Corporate Trust Services Industrial 180 East 5th Street Development Agency St. Paul, MN 55101 Special Facility Attn: Erik Starkman Revenue Bonds, Telephone (651) 244-8884 Series 1997 Fax (651) 244-8884 - and - Attn: Good Ubani Telephone (651) 244-8497 Fax (651) 233-8208 Bank of New York Unsecured Bonds $33,200,000 Western Trust Company 5.70% California 550 Kearney St., Suite 600 Statewide San Francisco, CA 94108 Communities Attn: Milly Canessa Development Authority Telephone (415) 263-2420 Special Facilities Fax (415) 399-1647 Revenue Bonds 2000 Series A (SFO) due October 1, 2034 HSBC Bank USA Unsecured Bonds $32,365,000 452 Fifth Avenue 6.05% Miami Dade New York, NY 10018 County Industrial Attn: Peter S. Worlfrath Development Telephone (212) 525-1403 Authority Special Fax (212) 525-1300 Facility Revenue Bonds, Series 2000, due March 1, 2035 U.S. Bank Trust, N.A. Unsecured Bonds $25,000,000 Trust Center 8.80% Regional Corporate Trust Services Airports 180 East 5th Street Improvement St. Paul, MN 55101 Corporation Revenue Attn: Erik Starkman Bonds Issue of 1984 Telephone (651) 244-8884 (LAX), due Fax (651) 244-8884 November 15, 2021 - and - Attn: Good Ubani Telephone (651) 244-8497 Fax (651) 233-8208 Galileo International Trade -- Catering $14,420,019 One Campus Drive system and Parsippany, NJ 07054 network fees Attn: George Alvord Telephone (973) 766-3902 Fax (973) 766-6565 Galileo International Trade -- Reservation $12,973,990 One Campus Drive system and Parsippany, NJ 07054 network fees Attn: Scott Thompson Telephone (973) 214-7305 Fax (973) 496-7001 Denver Airport Revenue Fund Airport rents $12,690,051 City & County of Denver and fees Department of Aviation 8500 Pena Blvd. Denver, CO 80249 Attn: Vicki Braungel Telephone (303) 342-2215 Fax (303) 342-2215 San Francisco Airports Airport rents $7,559,019 Commission and fees International Terminal 5th Floor San Francisco, CA 94128 Attn: John Martin Telephone (650) 821-4526 Fax (650) 821-5005 Atlantic Coast Airlines Trade -- United $4,600,000 45200 Business Court Express Dulles, VA 20166-9102 Attn: Tracy Smith Telephone (703) 650-6177 Fax (703) 650-6299 Pratt & Whitney Trade -- Aircraft $3,987,456 Commercial Engine Business maintenance parts 400 Main St. M/S 115-94 East Hartford, CT 06108 Attn: Robert Ledue Telephone (860) 565-4321 Fax (860) 565-3814 LSG Sky Chefs Trade -- Catering $3,500,091 524 E. Lamar Blvd. Attn: Randall Boyd Arlington, TX 76011 Telephone (817) 792-2191 Fax (817) 792-2222 Argenbright, Inc. Trade -- Security $3,378,522 3465 N. Desert Drive and airport Atlanta, GA 30844 services Attn: Dan DiGiusto Telephone (800) 338-5143 Fax (404) 267-2230 AT&T Trade -- Utility $3,099,745 227 West Monroe service Chicago, IL 60606 Attn: Tim Akers Telephone (312) 230-5300 Fax (312) 230-8055 Metropolitan Washington Airport rents $2,751,774 Airport Authority and fees One Aviation Circle Washington, DC 20001 Attn: James Wilding Telephone (703) 417-8610 Fax (703) 417-8949 Boeing Company Trade -- Aircraft $2,388,919 14423 SE Eastgate Way maintenance parts Bellevue, WA 98006 and services Attn: Mark Owen (Disputed Claim) Telephone (425) 237-8305 Fax (425) 865-7896 ----------------------------------------------------------------- [00006] DEBTORS' MOTION FOR JOINT ADMINISTRATION OF CASES ----------------------------------------------------------------- Pursuant to Rule 1015 of the Federal Rules of Bankruptcy Procedure, the Debtors ask the Court to direct joint administration of their separate Chapter 11 cases for procedural purposes. Marc Kieselstein, Esq., at Kirkland & Ellis, tells Judge Wedoff that UAL Corporation directly or indirectly owns a controlling interests in each of the other Debtors. Therefore, the Debtors are "affiliates" within the meaning of 11 U.S.C. Sec. 101(2) of the Bankruptcy Code and joint administration of their estates is appropriate under Rule 1015 of the Federal Rules of Bankruptcy Procedure. Mr. Kieselstein argues it would be extremely wasteful and taxing for the Clerk of Court to maintain separate dockets and for parties to file dozens repetitive motions, applications, and other pleadings in these cases. Joint administration will permit the Clerk to use a single general docket for the Debtors' cases and to combine notices to creditors and other parties-in- interest. Joint administration of the Debtors' cases will also protect parties-in-interest by ensuring that they will be apprised of various matters in each the Debtors' Chapter 11 cases. Finding substantial merit in the Debtors' request, Judge Beatty directs joint administration of the Debtors' cases as if they were one. Judge Wedoff directs that all pleadings and papers filed in these cases be captioned: UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION In re: : Chapter 11 : UAL Corporation, et al., : Case No. 02-48191 : Debtors. : (Jointly Administered) Judge Wedoff makes it clear that joint administration is a procedural mechanism and does not affect any party's right to request or oppose substantive consolidation of the Debtors' estates. ----------------------------------------------------------------- [00007] DEBTORS' MOTION TO GET $300MM DIP FINANCING FROM BANK ONE ----------------------------------------------------------------- It is essential to the success of these Chapter 11 cases that United Airlines immediately obtain access to new post-bankruptcy financing. Without it, the Debtors tell Judge Wedoff, United will be unable to continue to operate or generate income, purchase necessary goods and services, meet ongoing operational schedules, or pay ordinary course operating expenses. United has talked to potential lenders for months now, and there's not a long line of lenders anxious to lend new money. United's business plan was heavily criticized by the Air Transportation Stabilization Board when the company's $1.8 billion loan guarantee application was denied. Every commercial lender United's talked to has shared similar criticism. Long conversations and many through-the-night negotiating sessions have produced a workable post-bankruptcy financing plan. Bank One has stepped up to the plate with a first-in, last-out financing deal that will provide $300 million in fresh working capital to United. The Debtors ask the Court to approve that deal . . . and all of the strings that are attached. James H.M. Sprayregen, Esq., at Kirkland & Ellis, makes it clear to Judge Wedoff that United doesn't have another game plan and this is the best deal United knows. Bank One has agreed to provide United a stand-alone $300,000,000 amortizing term loan agreement with that will be secured by, among other things, revenue from certain Co-Branded Card Agreements. Bank One will make the $300 million immediately available to the Debtors upon the expiration of the ten-day appeal period (assuming no appeals) following United's assumption of the Co-Branded Card Agreements Bank One won't lend the money unless loan is secured by the revenue stream from the Co-Branded Card Agreements and conditioned its loan on the Debtors' assuming (1) an Umbrella Agreement, (2) a Mileage Plus Operating Agreement, (3) a License Agreement, (4) a Domestic Customer Service Outsourcing Agreement, and (5) a Side Letter between UAL and UAL Loyalty Services. Mr. Sprayregen steps Judge Wedoff through the details of these five agreements: The Co-Branded Card Agreements The Debtors formed UAL Loyalty Services in October 2000 with the intention that ULS would (a) operate as a sales agent for non- airline partners of the Mileage Plus Program and (b) manage and develop the Debtors' branded websites, including http://www.united.com In early 2002, the Debtors determined that the Debtors' primary customer loyalty and promotion programs should be united in one organization to reduce administrative duplication and foster a focused management team to assist in the development of these important customer programs. Accordingly, in March 2002, through a series of transactions, the Debtors transferred certain assets and liabilities relating to numerous loyalty programs from United to ULS. UAL, ULS, and Bank One Delaware are parties to the Co-Branded Card Agreements pursuant to which Bank One Delaware issues co- branded credit cards with United which cardholders can accrue mileage credit for travel awards redeemable through the Mileage Plus program for purchases made with the credit cards. The Co-Branded Card Agreements are ULS' single largest source of cash flow. Under the Co-Branded Card Agreements, Bank One Delaware is required to purchase a designated minimum amount of miles from ULS on a periodic basis. The designated amount of miles Bank One Delaware is obligated to purchase from ULS increases each year for the term of the contract. The recent amendments to the Co-Branded Card Agreements include, among other things, additional metrics to gauge the financial health of United. For example, a specified deterioration of United's financial health will result in a faster reduction of guaranteed cash flows to ULS, and a massive deterioration allows Bank One to terminate the Co-Branded Card Agreements. The Credit Card Agreements Although ULS is a stand-alone entity, the value of ULS' loyalty programs is inextricably linked to the Debtors' airline business because ULS' programs and services (a) support the Debtors' existing air travel customer base, (b) provide awards redeemable for credit on the Debtors' airline through the Mileage Plus program; and (c) generate ticket sales through the Debtors' branded website. These synergies are particularly apparent with respect to the Co-Branded Card Agreements. The Co-Branded Card Agreements not only provide significant revenue for ULS, but also foster increased air travel on United. Consequently, the Co- Branded Card Agreements, together with the related Credit Card Agreements, form an integral piece of the Debtors' business plan that should remain in place throughout these Chapter 11 proceedings. The importance and value of the Co-Branded Card Agreements, however, depends on the existence of the Credit Card Agreements between United and ULS because the Credit Card Agreements govern the obligations of ULS and United with respect to the operation, maintenance, and development of the Debtors' Mileage Plus program and branded websites, including http://www.united.com The Umbrella Agreement, for example, contains provisions governing the Mileage Plus Operating Agreement, that include, but are not limited to, exclusivity, confidentiality, warranties, indemnities, termination and dispute resolution. Pursuant to the Umbrella Agreement, United agrees to continue to operate its airline business, and ULS agrees to continue operating the Mileage Plus program, United's branded website and its other businesses. More specifically, United maintains the exclusive right to market products and services uniquely consumed as part of the air travel experience to certain customers, subject to certain restrictions in the Mileage Plus Operating Agreement and other Agreements. In addition, the Mileage Plus Operating Agreement establishes the relationship between United and ULS in connection with the Mileage Plus Program. Among other things, the Mileage Plus Operating Agreement precludes United from using any loyalty program other than the Mileage Plus program. It also grants United a license from ULS to issue and sell miles redeemable for air travel under the Mileage Plus program. The License Agreement supports the Co-Branded Card Agreements by providing ULS with irrevocable, nonexclusive, worldwide, royalty- free licenses to use, among other things, certain United domain names, trademarks, software, and systems in connection with the relationships contemplated by the Credit Card Agreements. In exchange, the License Agreement provides United with irrevocable, nonexclusive, worldwide, royalty-free licenses to use certain ULS domain names, software, systems, etc., and with an irrevocable, near exclusive, worldwide, royalty-free license to use certain ULS trademarks. Lastly, the United/ULS Side Letter provides assurances to Bank One Delaware that UAL, United, ULS, and other named Debtors will maintain the Umbrella Agreement, Mileage Plus Operating Agreement, License Agreement, and Domestic Customer Service Outsourcing Agreement and that the terms of those agreements will remain in full force and effect. Furthermore, the United/ULS Side Letter limits the rights of UAL, United, ULS, and the other named Debtors to make amendments to the aforementioned agreements. The Relevant Legal Standards This is the Only Deal United Has & It's Reasonable The Debtors propose to obtain financing under the Post-Petition Financing by providing security interests and liens as set forth in the attached exhibits pursuant to section 364(c)(1)-(3) of the Bankruptcy Code. The statutory requirement for obtaining postpetition credit under Section 364(c)(1), (c)(2), and (c)(3) of the Bankruptcy Code is a finding that the debtors are "unable to obtain unsecured credit allowable under section 503(b)(1) of [the Bankruptcy Code] as an administrative expense." 11 U.S.C. Sec. 364(c); see In re Ames Dep't Stores, Inc., 115 B.R. 34, 37 n.3 (Bankr. S.D.N.Y. 1990) ("A court . . . may not approve any credit transaction under subsection (c) unless the debtor demonstrates that it has reasonably attempted, but failed, to obtain unsecured credit under sections 364(a) or (b)."); In re Crouse Group, Inc., 71 B.R. 544, 549 (Bankr. E.D. Pa. 1987) (same). To obtain financing pursuant to Section 364(c) of the Bankruptcy Code, some courts apply a three-part test, requiring the debtor in possession to show that: (a) It could not obtain unsecured credit under section 364(b) -- i.e., by allowing a lender an administrative claim; (b) The credit transaction is necessary to preserve the assets of the estate; and (c) The terms of the credit transaction are fair, reasonable, and adequate given the circumstances of the debtor-borrower and the proposed lender. In re Crouse Group, Inc., 71 B.R. at 550. When scrutinizing a debtors' business decision, such as the type and scope of a DIP facility, bankruptcy courts routinely defer to the debtor's judgment, including the decision to borrow money on certain terms, so long as the decision at issue "involve[d] a business judgment made in good faith, upon a reasonable basis, and within the scope of [such debtor's] authority under the [Bankruptcy] Code." In re Curlew Valley Assocs., 14 B.R. 506, 513-14 (Bankr. D. Utah 1981); accord Group of Institutional Investors v. Chi. Mil. St. P. R. Co., 318 U.S. 523, 550 (1943); In re Simasko Prod. Co., 47 B.R. 444, 449 (D. Colo. 1985) ("Business judgments should be left to the board room and not to this Court."). United's Board and management are convinced the Bank One deal is the only realistic was the company will obtain financing to survive and that the terms are reasonable under the circumstances. The Debtors ask Judge Wedoff to ratify their business judgment and approve the Bank One financing package. Assuming the Agreements Makes Sense Too The Post-Petition Financing is conditional upon the Debtors' assuming the Co-Branded Card Agreements and the Credit Card Agreements. Under Section 365(a) of the Bankruptcy Code, a debtor, "subject to the court's approval, may assume or reject an executory contract or unexpired lease." 11 U.S.C. Sec. 365(a); see Borman's Inc. v. Allied Supermarkets, Inc., 706 F.2d 187, 189 (6th Cir. 1983). An executory contract is a "contract under which the obligation of both the bankrupt and the other party to the contract are so far unperformed that the failure of either to complete performance would constitute a material breach excusing performance." Sharon Steel Corp. v. Nat'l Fuel Gas Distrib. Corp., 872 F.2d 36, 39-40 (3d Cir. 1989) (citations omitted). Here, there can be no dispute that the contracts at issue are executory agreements, in that failure to perform them by any party would constitute a material breach. Thus, as discussed below, the primary legal issue is whether the Debtors' assumption of the Co-Branded Card Agreements and the Credit Card Agreements satisfies the "business judgment" standard. Similar to the Section 364 analysis, the assumption or rejection of an executory contract by a debtor in possession is subject to review under the business judgment standard. If such business judgment has been reasonably exercised, the court should approve the proposed assumption or rejection. See, e.g., NLRB v. Bildisco & Bildisco, 465 U.S. 513, 523 (1984); In re Taylor, 913 F.2d 102, 107 (3d Cir. 1990) (the decision to assume or reject an executory contract or unexpired lease is a matter within the "business judgment" of the debtor); Sharon Steel, 872 F.2d at 39-40; In re Minges, 602 F.2d 38, 42 (2d Cir. 1979) (same). Again, United's Board and management are convinced the assuming the Bank One Agreements is a reasonable exercise of their business judgment. The Debtors ask Judge Wedoff to ratify their business judgment and authorize (but not direct) them to assume the Bank One Agreements. ----------------------------------------------------------------- [00008] DEBTORS' MOTION TO OBTAIN $1.2 BILLION OF DIP FINANCING ----------------------------------------------------------------- Subject to concomitant approval of the $300 million stand-alone financing pact with Bank One, conditioned on assumption of the Co-Branded Card Agreements and secured by the revenue stream those agreements produce, * Bank One, * JP Morgan, * Citicorp, and * CIT Group on a pro rata basis, agree to extend: $500,000,000 of post-bankruptcy financing immediately; and $700,000,000 of post-bankruptcy financing if and when United achieves positive cumulative consolidated EBITDAR (earnings before interest, taxes, depreciation, amortization, and rent) and can report some additional cost reductions. "As one might expect in view of the size of the DIP loan and the rate at which the Debtors have been burning cash," James H.M. Sprayregen, Esq., at Kirkland & Ellis tells Judge Wedoff, "the DIP lenders have taken numerous steps to protect their interests." As is customary with DIP financings, the DIP lenders demand post- petition liens on the Company's otherwise unencumbered assets -- all aircraft, spare parts, international route authorities, and certain airport slots -- as collateral. But this collateral package, which was essentially the same package offered by United to the ATSB, was not enough. Like the ATSB, the Debtors disclose, the DIP lenders did not believe that the business plan presented by the Debtors to the ATSB had a reasonable chance of succeeding. According to the DIP lenders, regardless of the size of the DIP loan, the Debtors' cost structure precluded them from achieving profitability. The Debtors then went back to the DIP lenders with a revised business plan that contained significant cost reductions. Based on these estimated reductions, the lenders ultimately agreed to provide DIP financing for the Debtors. But before doing so, the lenders insisted on several significant loan covenants. * First, if the Debtors fail to achieve the financial targets (subject to a relatively small margin of error) in the business plan upon which the DIP loans were based, the Debtors will breach the covenants and face a possible default on the loans. A default would allow the lenders to foreclose on the collateral, which in turn will spell the end for the Debtors. Consequently, the Debtors will need to achieve significant cost savings within the first few months of the bankruptcy process to avoid defaulting on the DIP loans. * Second, to be eligible for the second phase of funding from the DIP Lenders (i.e., the $700 million), the Debtors must achieve positive cumulative consolidated EBITDAR, calculated from the beginning of the bankruptcy filing, as well as some additional cost savings. Without substantial labor savings, the Debtors' current business plan will not meet this threshold period. Without access to the additional financing, the Debtors will not be able to meet their financial targets and would thus default on the DIP loans under this scenario as well. In short, absent significant cost reductions in the next few months, the Debtors will not be able to access the capital they need to survive. Importantly, the Debtors' ability to reach agreement with the lenders on each facility was conditioned upon approval of both facilities. Bank One was unwilling to make its substantial initial loan without the significant "back-end" financing of the second facility. Specifically, Bank One made it plain that, unless the Debtors had access to a sufficient amount of capital for the Debtors' business plan to have a reasonable chance to succeed, Bank One was unwilling to participate in any financing package. Likewise, the three additional lenders participating in the $1.2 billion DIP refused to provide a significant "back-end" loan without Bank One's substantial initial loan. Here's the bottom line from United's perspective: Absent near immediate access to the DIP Facilities, the Debtors will not survive. Based on their current business plan, the Debtors will need to begin accessing the DIP Facilities almost immediately upon their availability. Any delay in the granting of this Motion would be devastating. The Debtors' businesses are service businesses, and their most valuable assets are their customers. It is crucial to the Debtors' reorganization efforts that the public maintain confidence in the Debtors' present and future ability to provide reliable services. Because of the Debtors' commencement of these Chapter 11 cases, the Debtors must be allowed to take immediate, active steps to preserve their customer base and essential relationships with, among others, the traveling public, tour operators, cargo and travel agents, other airlines with which they have agreements, fuel suppliers and other essential trade creditors, and certain other business entities. The Debtors must be allowed to continue their operations in a manner unaffected by the commencement of these Chapter 11 cases, for even a short disruption will generate substantial uncertainty and seriously impair the Debtors' ability to successfully reorganize. Mr. Sprayregen argues that this Second DIP Facility should be approved because: A. The Debtors Could Not Obtain Unsecured Credit Under Section 364(b) It is clear that a working capital facility of the type and magnitude needed here could not have been obtained on an unsecured basis. As detailed above, the Debtors explored numerous alternatives to bankruptcy. First, the Debtors significantly lowered expenses and costs by decreasing the number of daily flights, grounding a number of airplanes, reducing new aircraft deliveries, closing certain facilities, canceling or suspending major construction plans, downsizing workforce, cutting compensation, suspending dividends and interest payments, eliminating base commissions, changing corporate structure, and negotiating concessions from vendors and suppliers. The Debtors then canvassed the private and public financing markets, unable to obtain financing from twenty-four different financial institutions. Next, the Debtors exhausted every possible one- time source of liquidity. Lastly, the Debtors tried, albeit unsuccessfully, to obtain financial help from the federal government. In short, all efforts to obtain additional, sustained liquidity were unsuccessful because of the financial condition of the Debtors. And no member of the potential lending market was willing to provide funds on unsecured terms. The courts have made clear that "[t]he statute imposes no duty to seek credit from every possible lender before concluding that such credit is unavailable." Bray v. Shenandoah Fed. Sav. & Loan Ass'n, 789 F.2d 1085, 1088 (4th Cir. 1986). Rather, a debtor need only demonstrate "by a good faith effort that credit was not available without" the protections of Section 364(c) of the Bankruptcy Code. Id.; see also In re Plabell Rubber Prods., Inc., 137 B.R. 897, 900 (Bankr. N.D. Ohio 1992). In a case like this one, where there are few lenders likely to be able and willing to extend the necessary credit to the debtor, "it would be unrealistic and unnecessary to require [the debtor] to conduct an exhaustive search for financing." In re Sky Valley, Inc., 100 B.R. 107, 113 (Bankr. N.D. Ga. 1988). Thus, unsecured credit simply was unavailable to the Debtors. B. The DIP Facilities Are Necessary to Preserve Assets of the Debtors' Estates The Debtors need immediate access to the Post-Petition Financing. Indeed, no party in interest can seriously contend that the Debtors do not need such access. As with most large businesses, the Debtors have significant cash needs. Access to substantial credit is necessary to support the inherently capital reserve nature of the Debtors' domestic and international flight operations, purchase inventory, and services, and to meet the substantial day-to-day operating costs associated with operating and distributing goods to their customers. Access to sufficient cash is therefore critical to the Debtors' survival. In the absence of immediate access to cash and credit, the Debtors' suppliers will refuse to sell critical supplies and services to the Debtors, and the Debtors will be unable to meet current production and distribution schedules. In turn, many of the Debtors' otherwise loyal customers are likely to look elsewhere to purchase the services that the Debtors provide. The success of these reorganization cases depends on the confidence of the Debtors' suppliers and customers. If that confidence were destroyed by, for example, the denial of this Motion, then the Debtors' operations would likely collapse. In contrast, once the Post-Petition Financing is approved, the Debtors are confident that they can stabilize their businesses and achieve an improved financial performance, thereby preserving their operations. In reaching this conclusion, the Debtors are mindful that suppliers and customers often respond favorably to approval of a comprehensive debtor in possession financing. See In re Ames Dep't Stores, Inc., 115 B.R. at 36 ("It is given that most successful reorganizations require the debtor-in-possession to obtain new financing simultaneously with . . . the commencement of the Chapter 11 case."). The Debtors cannot wait for the beneficial effects of the Post- Petition Financing; any substantial delay would have the same effect as a denial of this Motion. The Debtors' need for access to the Post-Petition Financing is therefore immediate. C. The Terms of the Post-Petition Financing Are Fair, Reasonable, and Appropriate The proposed terms of the Post-Petition Financing are fair, reasonable, and appropriate in that these terms neither (a) tilt the conduct of these cases and prejudice the powers and rights that the Bankruptcy Code confers for the benefit of all creditors, nor (b) prevent motions by parties in interest from being decided on their merits. Like the facility approved in Sky Valley, the purpose of the facilities here is to enable the Debtors to maintain the value of their estates while formulating a confirmable plan of reorganization. Accord In re First S. Sav. Ass'n, 820 F.2d 700, 710-15 (5th Cir. 1987). ----------------------------------------------------------------- [00009] UAL EXECUTIVE WAGE CUTS TO TAKE EFFECT NEXT WEEK ----------------------------------------------------------------- CHICAGO, Illinois -- December 9, 2002 -- United Airlines (NYSE: UAL) today announced that in an effort to address its continued losses and control costs, the company has included in its Chapter 11 filing an immediate initial pay cut for officers and salaried and management employees. The company this week will begin discussions with the leadership of its unions to reach consensual agreement on how represented employees will contribute to the company's cost- control efforts. "Filing for Chapter 11 is the means by which we can stem United's continued losses and get our costs under control so we can transform our company into a more competitive airline," said Glenn Tilton, United's chairman, president and chief executive officer. "We have said for some time now that reducing labor costs are a critical component of our recovery effort and will need to be implemented as soon as possible." United's officers will take an immediate pay cut averaging 11 percent of their annual base pay. Salaried and management employees' wage reductions will be based on current wages, ranging from 2.8 percent for employees earning $30,000 or less, up to 10.7 percent for employees at the highest management salary level. The wage reductions are effective Dec. 16. In addition to their wage reductions, all salaried and management employees have forgone their planned 2002 merit salary increase and a 2002 incentive payment. United said that during its Chapter 11 case, it will maintain its ability to continue its global operations and continue its long-standing commitment to its customers, safety and reliability. ----------------------------------------------------------------- [00010] AIRLINE PILOTS ASSOC. PRESIDENT CHIDES ATSB & WHITE HOUSE ----------------------------------------------------------------- WASHINGTON, D.C. -- December 9, 2002 -- The following statement was released today by Captain Duane Woerth, president of the Air Line Pilots Association International, which represents 66,000 airline pilots, along with those who fly for United Airlines: "The aviation industry has been dealt yet another blow today as one of this nation's greatest airlines was forced to file for Chapter 11. Pilots across the country are saddened, disappointed and angry that an airline as eminent as United, which was used symbolically by terrorists to carry out mass destruction, is now in bankruptcy. It pains me to acknowledge that terrorism scored another victory today, and this Administration let it happen. "It was evident that the industry was entering an economic downturn prior to 9/11, but the spiraling effects of that tragedy, with the fall-off of passenger travel, increased security costs, ever escalating aviation taxes and mounting airline debt created a crisis in commercial aviation. Congress recognized this immediately following 9/11 by granting short-term financial aid and establishing the Air Transportation Safety and System Stabilization Act to guarantee long-term loans for those airlines most severely impacted by terrorism. Yet the Board that is in charge of guaranteeing these loans has turned its back on two airlines hit hardest by 9/11, United and U.S. Airways, whose core East coast operation nearly shut down when Washington Reagan airport closed indefinitely for security reasons. Instead of stabilizing the industry, the ATSB is doing its best to de- stabilize it, and this Administration -- which has intervened in more than one dispute citing fears of crippling the economy -- is ironically idly sitting by and letting another of our nation's premier airlines go into bankruptcy. "Perhaps President Bush needs to go beyond ousting his two top economic advisors and take a close look at the workings of the ATSB, for they are doing our industry more harm than good, and certainly not living up to their Congressional mandate. Even the head of the Air Transportation Association, Carol Hallett, recently said the only solution to our industry's malaise may be to nationalize the airlines! Is this on the Administration's agenda, or are they merely out to hammer down airline employee wages regardless of the consequences? Isn't it enough that to finance the War on Terrorism, the industry that was its primary victim is being asked to pay for the war through increased user fees and security costs, laying much of the burden on the backs of airline employees? "Somebody should start asking why the ATSB would not guarantee a loan for an exceptional company such as United, especially after its labor groups agreed to billions of dollars in wage concessions over five and a half years. Is this Administration so worried about the nation's poor economy that it believes the present economic downturn will last that far into the future, and thus prevent an airline as great as United from making a profit and paying back its loan? "And, somebody should also ask why the global airline industry is doing so much better than that in the U.S.? Their labor costs are higher and productivity lower than U.S. carriers, but they're still profitable. Could it be that the sudden drop in business travel revenue, excessive Internet fare discounting, mismanagement of pension funds, bad business plans and relentless U.S. government increases in user fees and taxes on our industry, in addition to the tragedy of 9/11, have something to do with the state of the U.S. airline industry? Taxes alone make up 44 percent of a $100 domestic ticket, higher than even the cigarette "sin tax" of 18 percent! "Unlike this Administration, ALPA will not give up on our U.S. airlines or its employees. Pilots have worked closely with United Airline's management to support the ATSB loan process, and they will continue to work with them to save their airline. ALPA will put the full weight of its resources behind the United pilots to help them work through this bankruptcy." ALPA is the world's oldest and largest pilot union, representing 66,000 pilots at 43 airlines in the U.S. and Canada. Visit ALPA's website at http://www.alpa.org. ----------------------------------------------------------------- [00011] FLIGHT ATTENDANTS VOW TO RESTORE UNITED'S NO. 1 POSITION ----------------------------------------------------------------- CHICAGO, Illinois -- December 9, 2002 -- Association of Flight Attendants, AFL-CIO, United Airlines Master Executive Council President Greg Davidowitch made this statement after the airline announced it would file for bankruptcy to continue operating as a result of the federal Air Transportation Stabilization Board denying its application for a loan guarantee: "It wasn't long ago that United Airlines was the biggest, best airline in the world. But a number of very poor decisions by recent CEO's, the loss of $20 billion in revenue among the major network carriers in our industry and the unethical collaboration between the Air Transportation Stabilization Board and some other airlines who stand to gain if United fails, combined to result in our carrier's bankruptcy filing. "Those outside forces will not succeed in grounding United. The coming months will be difficult and painful for flight attendants as we work through the bankruptcy process. But we are committed to continuing the unprecedented cooperation between employees and management that will be necessary to turn United around and successfully shepherd it through reorganization. "This process will mean further cuts to our contract and a bigger strain on our families. But we will face these challenges head on. We know and management knows what happens when a carrier fights with its workers in bankruptcy. There are enough former Eastern Airlines employees in our ranks to remind us of that. "Many cowardly airline CEO's, in their lobbying to get our ATSB application denied, questioned our resolve and the sacrifices we've made. The average United flight attendant has provided 12 years of dedication and earns an average of $32,000 a year. These dedicated workers voluntarily decided to take painful pay and benefit cuts to keep their carrier afloat. What flight attendants have been willing to offer United thus far has been awe-inspiring. And we will not let those who doubt us from the comfortable confines of their executive suites and six and seven figure salaries in the White House and Wall Street diminish our sacrifices or resolve to see this carrier succeed. "We will not be deterred from our goal of restoring United to the premiere airline in the world. We will continue to work with our United Airlines Union Coalition partners and airline management to position the carrier so that we can emerge as the preeminent airline in the industry once again. Those who doubt us will lose. They will not be able to compete with the new United." More than 50,000 Flight Attendants, including the 24,000 Flight Attendants at United, join together to form AFA, the world's largest Flight Attendant union. Visit us at http://www.unitedafa.org ----------------------------------------------------------------- [00012] TRAVEL AGENTS' ASSOCIATION GIVES PASSENGER TIPS ----------------------------------------------------------------- Alexandria, Virginia -- December 9, 2002 -- In response to the announcement by United Airlines that it had declared Chapter 11 bankruptcy, the American Society of Travel Agents (ASTA) issued the following statement: "The public's trust in the airline industry has been seriously shaken over the past year with a spate of bankruptcies despite a substantial government bailout last year," said ASTA President and CEO Richard M. Copland, CTC. "Airlines are failing at an unprecedented rate. United's application to the Air Transportation Stabilization Board apparently failed because revenue projections were overstated. Travel agents support airlines' success; however, they would like to see airlines receive equal treatment as businesses, just as travel agencies are treated. United may wish to rethink its relationship to travel agents and agents' efforts to promote consumer protection. "Despite the eroding confidence in the air transportation system, consumers still have a high degree of faith in the services their travel agents provide. That's because travel agents' first priority is still their clients," continued Copland. "Now more than ever, consumers need the expertise, resources and knowledge of their ASTA travel agent. The services agents provide can save consumers hassle and money, as well as get them to their destination with the least amount of stress possible. "Savvy travelers work with a travel agent and breathe easier knowing they have a travel professional in their corner, sorting through their options to help them reach their destinations. Travel agents can help travelers explore all their options, including alternative flights and departures from different airports or on different airlines," added Copland. "Without a travel agent, you really are on your own." ASTA gave these tips to consumers holding tickets on United Airlines, or any airline that has declared Chapter 11 bankruptcy: 1) Use a credit card. When selecting a supplier rumored to be in financial trouble, consumers should pay by credit card. Under the Fair Credit Billing Act, credit card customers have the right to refuse paying for charges for services not rendered. Details of the Fair Credit Billing Act can be found at the Federal Trade Commission's Web site at www.ftc.gov/bcp/conline/pubs/credit/fcb.htm. 2) Consider insurance. Some travel insurance policies may include supplier default protection. However, before purchasing insurance consumers should check with their ASTA member travel agent to determine what policy best meets their needs. 3) Remember Section 145. Consumers who already have purchased a ticket on an airline that ceases operations may be entitled to stand-by travel on other airlines. Section 145 of the Aviation and Transportation Security Act provides that airline passengers holding tickets (paper or electronic) from a bankrupt carrier for a particular route are entitled, at minimum, to transportation on a space-available basis on ANY airline currently serving that route within 60 days after an airline has suspended operations. Additionally, the maximum fee that an airline can charge for providing standby transportation should not exceed $25 each way. 4) File a claim. If all else fails and a consumer is unable to take advantage of the Fair Credit Billing Act or Section 145, they should file a claim with the bankruptcy court. The bankruptcy court usually provides filing instructions, including claim forms, within months after a bankruptcy is filed. To find the nearest ASTA member travel agency, consumers should visit the Society's Web site at http://www.astanet.com About ASTA The mission of the American Society of Travel Agents and its affiliate organizations is to enhance the professionalism and profitability of members worldwide through effective representation in industry and government affairs, education and training, and by identifying and meeting the needs of the traveling public. The Society is the world's largest and most influential travel trade association with over 24,000 members in more than 140 countries. ----------------------------------------------------------------- [00013] AIR LINE PILOTS ASSOC. SAYS PILOTS WILL CONTINUE FLYING ----------------------------------------------------------------- ROSEMONT, Illinois -- December 9, 2002--Captain Paul Whiteford, chairman of the United pilots unit of the Air Line Pilots Association (ALPA) representing United Airlines' 9,000 pilots today commented on the airline's filing for Chapter 11 bankruptcy protection: "United Airlines' Chapter 11 bankruptcy filing is one of the most difficult and disappointing developments in our proud history and one that we have worked extremely hard over the past 12 months to avoid. Since the events of 9/11, we have worked with the Company, along with the other unions at United, to produce an unprecedented labor cost reduction package and out of court restructuring program for United." "Regrettably, the Air Transportation Stabilization Board (ATSB) rejected this plan out of hand and there are no other options available for UAL at this time." "Despite these events, United remains in business and will continue to serve its valued customers across the globe. United's pilots will, as we always have, perform our duties with pride at the highest levels of customer service, safely flying our passengers in the professional manner the public demands from an industry leader." "Any successful restructuring of United in bankruptcy must involve continued cooperation and collaboration among ALPA, United management and all of the company's labor unions. We look forward to those discussions." "We believe in United and are committed to restoring our company's strength and shaping our future." ----------------------------------------------------------------- [00014] NYSE REVIEWING CONTINUED LISTING OF UAL SHARES ----------------------------------------------------------------- NEW YORK, New York -- December 9, 2002 -- The New York Stock Exchange ("NYSE") announced today that it is continuing its review of the continued listing status of the common stock of UAL Corporation (the "Company")--ticker symbol UAL-- as well as its related securities. The Company announced on December 9, 2002 that it and certain of its U.S. subsidiaries have filed for protection under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Northern District of Illinois, Eastern Division in Chicago. The NYSE has completed its review and will begin the procedure to resume trading in the Company's securities. However, the NYSE will carefully consider the price indications obtained in the opening process. The NYSE will move to immediately suspend trading in the Company's securities should (1)- these price indications or subsequent trading reflect a price that the NYSE deems to be "abnormally low;" (2)- the NYSE receives authoritative advice that the security is without value; or (3)- the Company falls below the quantitative continued listing standards listed in the next paragraph. Throughout the opening process and subsequent trading, the NYSE will continue to closely monitor events at the Company and the appropriateness of continued listing of the Company's securities. The NYSE's quantitative continued listing standards require total market capitalization of not less than $50 million over a 30 trading day period and stockholders' equity of not less than $50 million, in addition to total market capitalization of not less than $15 million over a 30 trading day period. The NYSE's continued listing standards also require a minimum share price of $1 over a 30 trading day period. The Company is currently in compliance with all of these quantitative continued listing requirements. The Exchange notes that it may make an appraisal of, and determine on an individual basis, the suitability for continued listing of an issue in light of all pertinent facts whenever it deems such action appropriate, and that the Exchange may, at any time, suspend a security if it believes that continued dealings in the security on the NYSE are not advisable. The related securities of the Company include the Depository Shares (each representing 1/1,000 of a share of 12-1/4% Series B Preferred Stock) -- ticker symbol UAL PrB -- the 13-1/4% Trust Originated Preferred Securities (TOPrS) of UAL Corporation Capital Trust I -- ticker symbol UAL PrT -- and the 10.67% Series A Senior Debentures due May 1, 2004 -- ticker symbol UAL04 - the 11.21% Series B Senior Debentures due May 1, 2014 of United Air Lines, Inc.- ticker symbol UAL14. *** End of Issue No. 1 *** ------------------------------------------------------------------------- Peter A. Chapman peter@bankrupt.com http://bankrupt.com ------------------------------------------------------------------------- Recommended Reading: Professor Stuart Gilson's newest title, "Creating Value Through Corporate Restructuring: Case Studies in Bankruptcies, Buyouts, and Breakups." List Price: $79.95 -- Discounted to $55.96 at http://amazon.com/exec/obidos/ASIN/0471405590/internetbankrupt ------------------------------------------------------------------------- ------------------------------------------------------------------------- Peter A. Chapman peter@bankrupt.com http://bankrupt.com ------------------------------------------------------------------------- Recommended Reading: Professor Stuart Gilson's newest title, "Creating Value Through Corporate Restructuring: Case Studies in Bankruptcies, Buyouts, and Breakups." List Price: $79.95 -- Discounted to $55.96 at http://amazon.com/exec/obidos/ASIN/0471405590/internetbankrupt -------------------------------------------------------------------------