Texas Air Corp. has agreed to pay its Eastern Airlines subsidiary $280 million to settle a bankruptcy examiner's findings that it bought Eastern assets at unfairly low prices, the examiner said Thursday.
The court-appointed examiner's findings supported a key contention by striking Eastern workers, who claimed Texas Air stripped their company of its most valuable assets to bolster sister carrier Continental Airlines, a non-union business.However, examiner David I. Shapiro did not agree with the union's request that Eastern be run by an outside trustee, which the unions had sought as protection against further predations by Texas Air during Eastern's bankruptcy reorganization.
Texas Air rejected the validity of Shapiro's findings, but said it would make the settlement payment in order to help bolster Eastern.
``We totally dispute those claims,' said Robert Sisk, an attorney for Texas Air. ``It's an agreement to keep Eastern flying.'
Attorneys for Eastern's unions did not immediately return telephone calls for comment on the examiner's report.
Approval of the settlement by U.S. Bankruptcy Judge Burton Lifland could remove a main obstacle in the airline's effort to emerge from bankruptcy, because some of the compensation would help satisfy creditor claims against Eastern.
Separately, Lifland approved Eastern's request that $60 million be taken from escrow funds to help finance its operations. The funds contain about $550 million raised by the sale of Eastern assets since it sought bankruptcy court protection last March 9.
Shapiro issued his findings following a lengthy investigation into the dealings between Texas Air, Eastern and Continental undertaken as part of Eastern's Chapter 11 bankruptcy case.
The company sought protection from creditors five days after the beginning of a strike by machinists, flight attendants and pilots that virtually grounded it. Eastern has been reorganizing as a smaller carrier and has hired replacements for many of the strikers.
The pilots and flight attendants unions abandoned the strike in November but Machinists remain on strike.
Shapiro said in the 300-page report that in 12 cases out of 15, there was substantial evidence Texas Air transferred assets worth between $285 million and $403 million from Eastern without adequately compensating the airline, as it was obligated to do.