A plan to set aside nearly 19 million shares of stock for about 400 senior managers at United Airlines when the carrier leaves bankruptcy protection drew fire from one of the airline’s unions on Thursday.
Giving a potential financial windfall to a select group is unfair, said Robert Clayman, attorney for the Association of Flight Attendants, pointing to job, pay and benefit cuts union workers have endured.
“In a [bankruptcy] case that’s been predicated on shared sacrifice, one has to question whether that’s appropriate,” Clayman said following a court hearing on the disclosure statement of United’s bankruptcy reorganization plan.
United proposes reserving 18.75 million shares of stock, or 15 percent of the 125 million shares the airline plans to issue post-bankruptcy, for its cadre of executives.
Compensation packages that include some form of equity are common at large companies, said Jake Brace, United’s chief financial officer.
“What we’re talking about is consistent with the marketplace, consistent with best practices in other organizations,” Brace said.
James Drury, chairman of a Chicago-based executive search firm, agreed.
“Stock is potentially the most valuable part of anybody’s package,” he said when told of United’s plan. “It’s not unusual for people in the top echelon.”
Such plans tie top managers’ pay to the performance of the company. If a company doesn’t do well financially, the shares of stock they receive do not perform well.
Although the scope of the stock compensation proposal was disclosed this week, United has discussed it with its committee of unsecured creditors, Brace said. Clayman also sits on that committee, which represents those owed money by United. No other members of the committee made an issue of it during Thursday’s hearing.
The flight attendants union he represents has had a contentious relationship with United, a situation exacerbated this year when the carrier terminated its pension plans. The flight attendants remain the only union that has not negotiated a replacement retirement plan.
In a statement filed with the court this week, Fruman Jacobs, attorney for the unsecured creditors committee, said the group has several concerns it is working to reconcile with United. Among them: the management equity plans and the scope and duration of planned restrictions on the trading of UAL stock post-bankruptcy.
United’s attorneys told Bankruptcy Court Judge Eugene Wedoff that it has resolved more than a dozen objections to its disclosure statement, and Wedoff indicated he would approve the statement Friday at the monthly bankruptcy hearing.
Among those that dropped objections was the Pension Benefit Guaranty Corp., the government-run pension insurance program that is assuming control of United’s plans. In return, the agency is set to receive about $500 million in convertible stock, as well as notes worth up to $1 billion.
The pension agency, which also has a claim on United stock that could give it ownership of more than 5 percent of the company, has objected to provisions in the airline’s plan that would restrict the sale of large numbers of shares. United has insisted such limits are necessary to avoid potential tax liabilities for the reorganized company.
The airline and agency are in talks to resolve the issue, said John Menke, attorney for the pension agency.
“We’re in discussions,” he said. “I can’t tell you where we are, but we’re in discussions.”
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