United Air Lines offers pilots $550 million convertible note for concessions

By Jeff Pines

Washington, Dec. 17 - United Air Lines Inc. is offering its pilots a $550 million convertible note in return for further concessions, according to documents filed Friday with the U.S. Bankruptcy Court for the Northern District of Illinois.

Other carrots the airline is offering the pilots include a revised profit-sharing program and that any reorganization plan United proposes will give the pilots a percentage of the equity given or other consideration given to general unsecured creditors.

"Thus, United's pilots will be highly motivated to continue delivering high quality service to United's customers at the same time the debtors satisfy their restructuring imperatives," the airline said in a Friday filing with the bankruptcy court.

In return the pilots must agree not to oppose United's efforts to terminate their pension plan. The pilots also must agree to help the airline find $150 million annually of non-labor savings.

The new agreement would be in force until Dec. 31, 2009.

Earlier this week, United said it would make changes to its salaried and management employees' compensation to deliver another $112 million in savings. United continues to negotiate with its other unions for more savings.

United said it needs $725 million more per year of savings from its workforce to get exit financing.

The Elk Grove Township, Ill.-based airline and its parent holding company, UAL Corp., filed for bankruptcy on Dec. 9, 2002. Its Chapter 11 case number is 02-48191.

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