United asking for pension default

[snow85]

http://news.yahoo.com/news?tmpl=story&u=/ap/20050510/ap_on_bi_ge/united_airlines

 

[gregsivers]

Bad idea if you ask me.

 

[ChuckMK23]

Like you couldn't have seen this coming. Say goodbye to "retire with dignity" = thing of the past

 

[DanMa1156]

Thought you might want to read this... the plan was approved

http://news.yahoo.com/s/ap/united_airlines

CHICAGO - A federal bankruptcy judge approved United Airlines' plan to terminate its employees' pension plans on Tuesday, clearing the way for the largest corporate-pension default in American history.

ADVERTISEMENT

The ruling, which carries broad implications for U.S. airlines and their workers, shifts responsibility for United's four defined-benefit plans to the government's pension agency.

That will save cash-strapped United an estimated $645 million a year, part of the $2 billion in annual savings it says it needs to line up enough financing to emerge from Chapter 11 bankruptcy as soon as this fall.

But the cost will be painful to its employees, who stand to lose thousands of dollars annually off their pensions when they are assumed by the Pension Benefit Guaranty Corp.

The PBGC, the government's pension insurer, initially opposed United's plan. But it agreed to drop that resistance last month in exchange for up to $1.5 billion in notes and convertible stock in a reorganized UAL Corp., United's holding company.

United's pensions are underfunded by an estimated $9.8 billion, of which the PBGC would guarantee only about $5 billion. The previous largest U.S. pension default was Bethlehem Steel's $3.6 billion in underfunding in 2002.

Judge Eugene Wedoff said the settlement, while disputed, does not violate any law or United's collective bargaining agreement and he noted that employees at companies such as United could end up with fewer or even no benefits if no arrangement is made and the company goes broke.

"The least bad of the available choices here has got to be the one that keeps an airline functioning, that keeps employees being paid," Wedoff said.

United Chief Financial Officer Jake Brace said the ruling is crucial for United to come out of bankruptcy.

"It's not a good outcome. It's unfortunately a necessary outcome," he said. "This is not in any way a joyous day. It is an important step in our restructuring and in making our airline successful and viable for the long term."

United's effort to dump its pensions has been watched closely by the rest of the airline industry, where record fuel costs, the lowest fares since the early 1990s and stiff competition have caused network carriers to lose billions of dollars. Tuesday's ruling, following a step taken successfully by US Airways Group Inc. in February, clears the way for similar actions elsewhere.

United's biggest competitors would be under the most pressure to follow suit. American Airlines, the largest U.S. carrier and a unit of AMR Corp., has said it will keep its pension plans but is concerned about No. 2 United gaining a financial advantage with the elimination of its pensions.

On Wednesday, flight attendants for American will gather in Washington to lobby for federal pension reform that would allow carriers to extend the amount of time they have to replenish underfunded plans and provide relief to airlines that seek, through collective bargaining, to preserve rather than terminate their pension obligations.

No. 3 Delta Air Lines Inc., which has said it is in danger of being forced to file for Chapter 11 bankruptcy, faces $3.1 billion in pension payments over the next three years.

An overflow crowd of current and former United workers showed up at bankruptcy court Tuesday, with more than 100 packing the courtroom and dozens more listening to piped-in proceedings in a separate courtroom.

Unions representing United's flight attendants, mechanics and ramp workers have expressed their ire at both the airline and the government's pension insurer, PBGC, for agreeing to drop its opposition to United's plan last month. In exchange for that settlement, the PBGC would get as much as $1.5 billion in notes and convertible stock in a reorganized UAL Corp., United's holding company.

Attorney Jeffrey Cohen said the PBGC, which might have been unable to halt United's plan in any case, made the agreement as "a matter of last resort." Disputing the flight attendants' contention that the deal violated its mission, he said the agency concluded that cutting a deal was in the best interest of not only those with pensions at United and other companies but also for taxpayers who fund the pension insurer.

In addition, he said, "We think it helps clear a path to the exit door" for United to leave bankruptcy.

Lawyers for United's unions spoke ardently earlier Tuesday against the proposal.

Robert Clayman, an attorney for the Association of Flight Attendants, drew loud applause and cheers from employee spectators in both the courtroom and auxiliary court with an emotional appeal to preserve the pensions and workers' secure retirements.

"Without equity there is no justice," he said.

Jack Carriglio, an attorney for retired United pilots, said the airline should be ashamed of the agreement and warned of the consequences among angry employees.

"A strike is a real prospect if that agreement is approved," he said. "Also, this will have a grave impact on United employees' morale."

United's controversial move risks provoking action by employees who already have agreed to sharp cuts. Unions have raised the possibility of striking if United terminates the pensions and has its labor contracts overhauled.

 

[snow85]

saw yesterday that Delta may follow suit. in keeping with tradition here, :-/

 

[A4sForever]

(note: substitute the name "UAL" with that of your favorite civilian company .... or your future military pension ... ??? "They" have done it with medical and dental ... are pensions next ???)

Is this the end of pensions ??
In the future, will any company offer a pension?

[font=Verdana, Arial, Helvetica, sans-serif]By Dan Ackman[/font]
[font=Verdana, Arial, Helvetica, sans-serif]Forbes[/font]
[font=Verdana, Arial, Helvetica, sans-serif]Updated: 3:02 p.m. ET May 11, 2005[/font]

[font=Verdana, Arial, Helvetica, sans-serif]NEW YORK - In the future, will any company offer a pension? The answer is probably not, and the future is getting closer all the time.[/font]

[font=Verdana, Arial, Helvetica, sans-serif]Tuesday a U.S. federal Bankruptcy judge approved a plan by UAL, the parent company of United Airlines, to transfer its pension plans, which are underfunded by $9.8 billion, to the Pension Benefit Guaranty Corp., which is itself underfunded.[/font]

[font=Verdana, Arial, Helvetica, sans-serif]UAL's move is expected to spur similar actions by other so-called legacy carriers among the airlines, which are squeezed by high costs, competition from airlines without substantial pension obligations and, lately, by rising fuel costs.[/font]

[font=Verdana, Arial, Helvetica, sans-serif]More broadly, UAL's action takes place against a looming retirement crisis in which the relatively benign problems of the Social Security system are just a part.[/font]

[font=Verdana, Arial, Helvetica, sans-serif]The decline of pensions is likely well past the tipping point already. No so long ago, the defined benefit pension -- guaranteed retirement income -- was a prevalent aspect of the U.S. financial scene. But no more. In 1980, 38 percent of Americans had a defined benefit pension as their primary retirement plan. By 1997, just 21 percent of Americans had such plans, according to the Pension Benefits Council. That percentage is certainly lower now, and more and more plans have been passed off to the PBGC, a federal agency that insures pensions, but which does not necessarily pay the benefits retirees expected.[/font]

[font=Verdana, Arial, Helvetica, sans-serif]The ratio of active to inactive workers in existing defined benefit pension plans has fallen to roughly 1-to-1, down from more than 3.5-to-1 in 1980, according to the PBGC. This retirement math is starker than that faced by the Social Security system. The PBGC now pays the pensions of more than 1 million retirees.[/font]

[font=Verdana, Arial, Helvetica, sans-serif]While many more workers now have retirement savings plans such as 401(k)s, relatively few have sufficient assets to fund their retirements in a way that will maintain all or most of their pre-retirement incomes.[/font]

[font=Verdana, Arial, Helvetica, sans-serif]United's unions are preparing to fight the decision made by the company and permitted by the bankruptcy court, and they have threatened to strike. But with the defined pensions now a decidedly minority benefit, their partial loss is not likely to resonate politically or among United's customers.[/font]

[font=Verdana, Arial, Helvetica, sans-serif]More likely, the court's decision will encourage other airlines to follow suit. US Airways Group, which, like UAL, is in bankruptcy, terminated the last of its pension plans earlier this year. Tuesday, Delta Air Lines said it might have to seek bankruptcy protection, too, adding that it expected a significant loss for 2005. The airline industry already has the second-most beneficiaries of any industry covered by the PBGC guaranties. Steel is by far the first. Unlike steel, however, the airline industry is not in a long-term slide in terms of total employment, despite its financial troubles over the past several years.[/font]

[font=Verdana, Arial, Helvetica, sans-serif]The PBGC guarantees corporate pension plans and pays benefits to retirees when company plans fail. When it takes over a plan, it receives its assets as well as its liabilities, and also collects insurance premiums from the plans it guarantees. So far, the agency has been able to meet its obligations, but currently it faces a $23.3 billion deficit between its assets and long-term liabilities. The takeover of the UAL pension plan is already factored in that number. Overall, it backstops the pensions of 44.3 million beneficiaries.[/font]

[font=Verdana, Arial, Helvetica, sans-serif]The bankruptcy court frees UAL from $3 billion in pension contributions over the next five years. But the shortfall between its pension plan assets and its liabilities is much greater, nearly $10 billion, according to PBGC estimates.[/font]

[font=Verdana, Arial, Helvetica, sans-serif]It is not immediately clear which beneficiaries will be paid less and by how much. The PBGC's maximum guaranteed benefit is adjusted yearly. This year, the maximum paid to most retirees is $45,614 for a 65-year-old, so those who are now due more or who retire earlier would be paid less.[/font]

[font=Verdana, Arial, Helvetica, sans-serif]UAL says unloading its pensions is critical to obtaining the $2 billion or more in debt financing it needs to get out of bankruptcy. However necessary, in a world where employer-paid pensions are increasingly rare, unloading pension obligations is likely to become increasingly common.[/font]

 

[A4sForever]

House Measure Would Block UAL Pension Default

[font=Verdana,Sans-Serif]Friday June 24, 5:34 PM EDT[/font]




[font=Verdana,Sans-Serif]WASHINGTON (Dow Jones) -- The House of Representatives on Friday passed legislation that would block bankrupt UAL Corp. (UALAQ), the parent of United Airlines (UALAQ), from defaulting on its pension liabilities and transferring them to the Pension Guaranty Benefit Corp.

If the language survives the legislative process, it could eventually present a roadblock to what the company has maintained is a vital step in its plan to get out of Chapter 11 protection, where it has been for more than two years. For the airline's flight attendants union and congressional opponents to corporate bailouts by the government-backed PBGC, the amendment offers hope that the airline can be turned around while preserving retirement benefits for its employees.

The vote also could have far-reaching implications for any company thinking of looking to the PBGC to take over its pension plans.

UAL in a statement, criticized the measure for singling out the airline, but insisted the amendment would have no immediate effect on the company's proposed restructuring.

The House voted 219-185 to approve the amendment to an annual spending bill, with 30 Republicans joining Democratic backers to assure passage. The House subsequently passed the spending bill. In May, the federal judge overseeing United's turnaround ruled that the company could offload pensions that cover 119,000 current and former workers on to the PBGC.

The PBGC has agreed to take over pension plans terminated by bankrupt US Airways and UAL Corp. In the case of United, pensions were underfunded by around $9.8 billion. The PBGC will cover around $6.6 billion of the obligations, leaving many United employees to receive thousands of dollars less annually.

The Senate will draft its own version of the appropriations bill, which sets fiscal 2006 funding for the departments of Labor, Health and Human Services, and Education, and related agencies. To become law, the UAL-related provision would have to survive an eventual House-Senate conference.

If signed by President Bush, the law wouldn't take effect until Oct. 1, the beginning of the new fiscal year.

Nevertheless, the vote sends a message to United Airlines and other employers, said Rep. George Miller, D-Calif., the primary sponsor of the amendment. "Dumping pension plans onto the federal government is not a way to cut your labor costs - it is a last resort to save your company," Miller said.

The measure won the applause of the Association of Flight Attendants. This is a significant win for United flight attendants, and for all working Americans who are concerned about retirement security," said Greg Davidowitch, president of the Association of Flight Attendants at United.

United, in a statement, said the House measure was ill-timed, and also accused the flight attendants union of seeking to undermine the restructuring process. "Given the complex and lengthy (restructuring) process, it is inappropriate for the House to single out United and interfere now, especially since the pension issue has been consensually resolved with every union other than the [ Association of Flight Attendants]," UAL said. "It is ludicrous that the AFA's leadership continues to seek to undermine United's restructuring since the flight attendants lose less on pensions than any other group." ... (OPINION: you gotta love the chutzpah of UAL management ..... with those guys it never ends .....)
[/font]

 

[gregsivers]

Personally I think its a good move on the govt. American is doing what it can to keep its pension plans and most of the employees/unions are in agreement from what I've read.

 

[A4sForever]

AA has ALWAYS been smarter that UAL ..... they are gonna' be a survivor. The question is: will it be solo or will they merge???

 

[HooverPilot]

I think AA is pretty wary of the merger these days. Although the TWA merger was good for many, the timing really made it a difficult experience for AA. Most of the TWA guys are still out on furlough.

 

[A4sForever]

I think AA is pretty wary of the merger these days. .....

Do you mean AA "wary" as in ... "stay away" .... or as in "cagey" and "head's up ???

 

[HooverPilot]

Do you mean AA "wary" as in ... "stay away" .... or as in "cagey" and "head's up ???

I mean as in stAAy awAAy. :icon_mi_1

 

[A4sForever]

I mean as in stAAy awAAy. :icon_mi_1

Yeah, but I dunno .... a couple/few years ago AA and NWA were exploring "merger" ... trust me. They are "firing up" and staffing the merger committees again --- don't know what direction it will take. Delta is still out there looking for love in all the wrong places .....

In any case, the whole industry with regard to the "legacy" carriers is going to change in the next 1-3 years.

 

[HooverPilot]

I believe that things are firing up, I just hope that the inevitable consolidation doesn't stop the recalls & hopefully in a few year the hiring!

 

[squeeze]

wonder how many execs get multi-million dollar bonuses for figuring this scheme out?