United creditors to get
4 to 7 cents on the dollar

United Airlines parent UAL Corp. filed a plan to emerge from bankruptcy protection after more than three years, providing unsecured creditors with as much as 7 cents per dollar they are owed.

Unsecured creditors are expected to have claims valued at $20 billion to $30 billion, United said in one of several documents filed yesterday. Holders of UAL's current shares would get nothing, as the company had indicated previously. The plan is subject to bankruptcy court and creditor approval, and UAL intends to exit Chapter 11 protection by Feb. 1.

United, the second-largest U.S. airline, has won two rounds of labor concessions for almost $4 billion in annual savings, renegotiated lower plane lease rates and cut commuter carrier expense since entering bankruptcy in December 2002. Chicago-based UAL still faces more than $1 billion in debt due next year, said Fitch Ratings analyst Bill Warlick.

"It highlights the need for this company to turn its operating performance around in a hurry," Warlick said in an interview from Chicago, after reviewing UAL's plan projections.

UAL expects operating income of $916 million next year and $545 million in interest expense, according to projections in its filing. Net income would be $10.4 billion with the benefit of so- called fresh start accounting that erases some debt.

The airline has sought to cut costs so it can be profitable while competing with discount carriers. Rising costs for jet fuel, the industry's second-largest expense behind labor, have made reaching that goal harder. The price of jet fuel has risen 79 percent this year to $2.22 a gallon and has almost tripled since UAL filed for bankruptcy.

"The plan of reorganization reflects the financial foundation of the much stronger, much more competitive United that we have built," Chief Executive Glenn Tilton said in a message to United workers today.

UAL's current common shares, as well as preferred stock, would be canceled when the company emerges from bankruptcy. The company has said several times that those shares would probably lose all their value in the reorganization, which is typically the case in bankruptcies.

The shares fell 65 cents, or 50 percent, to 64 cents yesterday in over- the-counter trading. The stock traded as high as $2.40 in June and reached $101.75 in October 1997.

Employees owned 55 percent of UAL's stock before the bankruptcy. They got the stock in 1994 in exchange for concessions to aid the company and could not access it until retirement.

Unsecured creditors, or those who didn't have collateral for credit provided, will receive between 4 cents and 7 cents on the dollar, UAL said. Payments to the creditors will mainly be in the form of shares of new UAL stock.

In US Airways Group Inc.'s 2003 bankruptcy reorganization, unsecured creditors got about 2 cents on the dollar.