AFA:Latest Bankruptcy Updates

December 13, 2002

Negotiators and their advisors from each group of the Union Coalition met with United management to discuss concepts for participation in the yearly $2.4 Billion labor savings in the United Airlines Restructuring Plan. At this point, no details are available since talks are conceptual in nature. As soon as practical, details will be presented to you.

To get through the reorganization, United had to line up financing to provide it with cash on hand as it navigates the process. Bankruptcy is an expensive endeavor, with legal and bankruptcy consultants’ fees totaling in the hundreds of millions of dollars when all is said and done. The most important condition to us is that the lenders are requiring the airline to reduce its costs by about $2.4 billion annually. This is over and above the reductions planned for in the Recovery Plan we were working under outside of bankruptcy. Those cost reductions must be secured by mid-February. Thus, things will happen very fast.

Our negotiating committee will work to minimize the cuts as much as possible within the conditions set forth by the lenders. AFA will work with management to ensure that the cuts we face are targeted so that they have the least impact on our quality of life. We are participating in these discussions because we have a chance to shape the way the cuts are applied. If we just walked away, management would take its last offer to the bankruptcy court judge and ask for the changes to be made to our Contract. Not negotiating leaves all of the control in the hands of management. We want to keep as much control over this impossible situation as we can. In the end, you will get a chance to vote on any agreement we reach.

U.S. Trustee Ira Bodenstein officially named United AFA to a position on the unsecured Creditors Committee. AFA, ALPA and the IAM will all have representatives on the committee. The role of the committee is to protect the interests of unsecured creditors. The Committee will monitor and receive information from United and the court during the bankruptcy process. AFA competed for this seat with quite a number of creditors that are holding a great stake in United’s debt. It is quite an accomplishment for labor to achieve three positions on the committee, and a definite tribute to the work of AFA and our MEC President Greg Davidowitch. The Creditors Committee consists of 13 creditors. In addition, the first formal action undertaken by the Committee was to appoint the City of Chicago as a non-voting member. All of the Members of the Committee have a vested interest in the outcome of the bankruptcy, and so does the City of Chicago. The Committee members are:

Pension Benefit Guaranty Corporation
Association of Flight Attendants
Air Line Pilots Association
International Association of Machinists
Bank of New York
Airbus North America Holdings, Inc.
Pratt & Whitney
HSBC Bank USA
US Bank National Association
R Squared Investment, LDC
Deutsche Lufthansa AG
Goodrich Corporation
Galileo International, Inc.
*City of Chicago

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December 12, 2002

United's labor teams met Thursday with representatives from the Unions to continue discussions that began Tuesday with the Union Coalition’s representatives and financial advisors.

At the meeting, Executive Vice-President-Strategy Doug Hacker presented an overview of the company's business plan long term and short term, what will be released today is the announcement that along with a leaner, more competitive mainline operation, the strategy team believes it's necessary to offer a low-cost, no frills product in markets dominated by leisure customers and low-cost competition.

Unlike the former United Shuttle, this product would operate as a “separate” airline with a cost structure that is fully competitive with low-cost carriers.

What does this mean for Flight Attendants?  We expect we will be given that information shortly, because in the short-term, the company is working on very tight timeframes established by the lenders to reduce labor costs. Thursday’s NewsReal stated that they need to lower the labor costs to continue to receive the money United needs to operate during bankruptcy.

Q&A Updates

Q: Who is the administrator of the Flight Attendant Pension Plan?

A: The (Pension) Plan administrator is United Airlines.

Q: When I go to the PBGC website how come United Airlines is not listed as one of the Companies?

A: United is not listed on the PBGC website because the PBGC has not
taken over our Pension Plan.

The PBGC takes over a (DB) Plan only under a standard or distress
termination, neither of which has occurred. This information can also
be found in the Bankruptcy Q & A.

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