2003 - UAL Corp. (NYSE: UAL), the parent company of United Airlines, today announced that the company has received a private letter ruling from the U.S. Internal Revenue Service (IRS) that permits State Street Bank & Trust, the independent fiduciary of the UAL Employee Stock Ownership Plan (ESOP), to sell an additional 3.9 million shares of UAL stock held by the ESOP without jeopardizing tax benefits related to UAL’s net operating losses (NOL). The IRS ruled that certain sales of stock by the 401(k) plans managed by Fidelity Management Trust Company and by a mutual fund that had previously held a large amount of UAL stock did not need to be included in the calculation of an ownership change for the purposes of preserving the NOL. Preserving the NOL should generate substantial tax benefits following UAL’s emergence from Chapter 11 protection. After State Street has sold the additional 3.9 million shares, the UAL ESOP will still hold stock convertible into approximately 16 million UAL common shares.
Remaining in effect is the order issued by the U.S. Bankruptcy Court for the Northern District of Illinois, Eastern Division in Chicago, preventing certain parties from buying or selling UAL common stock or purchasing debt claims against UAL. Those restrictions are necessary in order to avoid triggering certain change in control consequences that would severely limit the company’s NOL. The parties affected by the order include holders of more than 4.8 million shares of common stock on an as-converted basis and holders of claims of $200 million or more against UAL companies.
The company noted that further sales of UAL stock by State Street may lower employee ownership in company benefit plans below 20 percent, triggering “Sunset” provisions (as described in the company`s most recent Form 10-Q) that affect UAL’s corporate governance structure. Depending on the amount and timing of share sales by State Street, the “Sunset” changes could occur in the next few weeks. The changes provided by the “Sunset” provisions include:
* Elimination of special Board, Board committee and shareholder votes, such as for acquisitions, divestitures and CEO appointments, among others;
* Elimination of the 55% shareholder voting power of the ESOP;
* Board discretion to change its committee structure and membership; and
* Possible changes in Board members, other than those representing the Air Line Pilots’ Association (ALPA), International Association of Machinists and Aerospace Workers (IAM) and salaried and management employees. Decisions regarding potential Board nominees would be made by the Board’s outside public directors nominating committee.
United Airlines was rated number one in on-time performance for 2002. News releases and other information about United Airlines can be found at the company’s website, www.united.com.