The US judge overseeing United Airlines' bankruptcy case on Tuesday upheld Denver Airport's claims that the airline must repay as much as USD$261 million of municipal bond debt.

But Judge Eugene Wedoff for the Northern District of Illinois Eastern Division rejected bondholder claims made by John F. Kennedy Airport, and California's airports in San Francisco and Los Angeles.

JFK had about USD$34 million of bonds outstanding that could be affected by the decision, according to Fitch Ratings Analyst Peter Stettler. San Francisco had nearly USD$155 million, while Los Angeles had a total of about USD$59 million.

United, the world's second-biggest airline, filed for bankruptcy protection in December 2002. Jean Medina, a spokeswoman for the airline, which hopes to exit bankruptcy this summer, said it was pleased with the rulings regarding airport leases in Los Angeles, San Francisco and New York City.

She added that bonds related to those airports will be treated as other unsecured, pre-petition debt that the airline will deal with in its reorganization plan. This means that other creditors will be paid before these bondholders.

"We believe it will help United reorganize more efficiently and effectively," she said.

In the case of the Denver Airport ruling, which upheld the existence of a lease with the airline, Medina said United was considering all of its legal options.

Doug Jessop, a lawyer with Denver-based Jessop & Co., which helped represent Denver Airport, said he assumed United would appeal.

Referring to the decision, he added: "It means the bondholders at least for Denver will be paid as an administrative expense going forward. It means if they (United) want to stay in that facility they have to assume the lease and cure any past defaults."

(Reuters)