While airline bankruptcies are becoming almost commonplace, Gerald Naekel has not forgotten what it was like to get tangled up in United Airlines’ bankruptcy. In the process, he nearly lost his business and his home.
When United lost billions and filed for bankruptcy protection, it meant Naekel didn’t get paid.
United owes $527,000 to GLN Compliance Group, the small aviation consulting firm Naekel owns and heads. If the airline’s new bankruptcy reorganization plan is approved, Naekel is likely to get $36,890 at most. And even that meager amount would come years after it was due.
Although crucial to his livelihood, Naekel’s claim is just one small piece of the estimated $20 billion to $30 billion the airline will owe its unsecured creditors, those who did not have United assets as collateral against its debts.
In a reorganization plan filed earlier this month, United proposed paying unsecured creditors such as Naekel 4 to 7 cents on each dollar owed, much of it in new UAL stock. Secured creditors, or those who have liens on United’s property, would be paid in full.
And because Delta and Northwestern airlines also filed for bankruptcy protection last week, more businesses that serve the airline industry will find themselves in similar positions.
Much of Naekel’s Centennial Airport- based business was with United until its bankruptcy. The airline’s unpaid bills and other legal issues “brought us right to the edge of bankruptcy,” he said. “…This was just a little company. We should have never gotten ourselves strung out to that level with a big company.”
Naekel whittled his staff from about 20 people to about five. He and his wife refinanced their house and put about $52,000 on four credit cards to make payroll.
Because small-business owners have to give personal guarantees for financing, the Naekels would have lost their home if they had closed the business.
“We just plain hung in there,” Naekel said. “You don’t have any choice. We did everything we could to stay alive, and then we kind of made the decision that we would never get strung out again.”
If United settles for 4 to 7 cents on the dollar, he said, “the only people that make money out of this are lawyers.”
Naekel’s story is not unique.
“Very frequently you will see that a large bankruptcy will bring down a bunch of other small firms at the same time,” said Douglas Baird, a bankruptcy professor at the University of Chicago Law School.
Creditors like Naekel were “dealt a really lousy hand three years ago,” Baird said, “and will get the pieces that are left over.”
Businesses that could be hit the hardest in coming months are those that cater to the airline industry and extended credit to troubled companies, he said.
Naekel is a former military pilot and former Federal Aviation Administration inspector. He started his business in the mid-1980s and moved into offices at Centennial Airport about seven years ago.
As United tried to launch a new fractional-ownership jet service, it hired GLN to help get FAA certification. The contract ended badly in 2001, and Naekel filed suit against the airline. He filed another suit in 2002 that accused former United executives of stealing from his company certification software and pilot training manuals worth about $400,000.
United denied the allegations. The case was put on hold once the airline filed for bankruptcy.
Since 2002, Naekel has slowly rebuilt his company and is now doing a healthy business, working with airlines around the world on FAA certification and compliance. But the best way for him to recover the disputed money may be United’s successful exit from bankruptcy.
“We’re pulling for United,” Naekel said. “Isn’t that kind of ironic? They just about bankrupted us.
“God, I hope they make it through.”
Staff writer Kelly Yamanouchi can be reached at 303-820-1488 or kyamanouchi@denverpost.com.
