Creditors Back Airline in Disney Battle

United Airlines' creditors have sided with the airline in its battle with the Walt Disney Co., saying the entertainment company's bid to collect a debt could have a "staggering" effect on the airline's other creditors.

The dispute, scheduled for a hearing on Nov. 18 before a bankruptcy judge in Chicago, involves tax benefits Disney said it lost when UAL Corp., United's parent company, in 2003 rejected a lease on a Boeing 757 jet that was partly owned by Disney.

Disney took a $114 million pretax charge that year over aircraft-lease transactions involving UAL, which had been seeking to reorganize under Chapter 11 bankruptcy protection at the time.

Disney said it's entitled to full compensation from the airline. If the judge agrees, the airline could owe a total of $5.1 billion in similar claims, said United and its creditors.

Disney, which got into the aircraft-leasing business partly because of the tax benefits, has sought to recover money it says it is owed under a tax indemnity agreement with United, court documents said. Disney said the contract required United to compensate it for any tax loss Disney might suffer from a cancellation of aircraft leases.

The rejection of the claim would "impact literally billions of dollars of filed claims in this case and have serious repercussions throughout the aircraft-finance industry", because hundreds of aircraft in United's fleet are subject to similar leveraged-lease agreements, Disney said.

United, however, has argued that Disney should take its claim to the trustee in charge of collecting debts that United owes to other owners of its leased aircraft.

United's creditors committee agreed, and said in court papers late last month that the equities weigh in favor of rejecting the claim.

Copyright 2005 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

News stories provided by third parties are not edited by "Site Publication" staff. For suggestions and comments, please click the Contact link at the bottom of this page.