Nbadan
05-10-2005, 07:18 PM
Judge Rules United Airlines Can Terminate Employee Pension Plan
created: 5/10/2005 5:37:54 PM
updated: 5/10/2005 5:38:43 PM
CHICAGO (AP) --A federal bankruptcy judge in Chicago approved United Airlines' plan to terminate its employees' pension plans. His actions clear the way for the largest corporate-pension default in American history.
With scores of its concerned employees and retirees looking on, United Airlines told a judge Tuesday it has no choice but to shed billions of dollars of pension obligations in order to emerge successfully from bankruptcy.
At a packed hearing with broad implications for U.S. airlines and their workers, United asked a federal bankruptcy judge to approve an agreement shifting responsibility for its defined-benefit plans to the government's pension agency. The funds are underfunded by an estimated $9.8 billion.
Unless rejected by Judge Eugene Wedoff, it will be the largest corporate-pension default in U.S. history, topping Bethlehem Steel's $3.6 billion in underfunding in 2002.
The deal would be a blow to airline employees. The federally backed Pension Benefit Guaranty Corp., which has agreed to take over the pensions, would guarantee only about $5 billion of the benefits, meaning some employees would lose thousands of dollars annually off their pensions.
"It was not our first choice," said United's chief bankruptcy attorney, James Sprayregen. "But this deal, if approved by the court, solves any number of issues."
"We don't see an alternative to what we're proposing today and tomorrow," he said, referring to a separate hearing starting Wednesday at which United is proposing to overhaul its labor contracts over its unions' objections in order to impose lower pay and benefits.
United, which has been unprofitable since 2000, says terminating the pensions and replacing them with defined-contribution plans would save it $645 million per year, part of the $2 billion in annual savings it needs to secure exit financing to end its 29-month stay in Chapter 11 bankruptcy.
The effort to dump its pensions is being 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. A successful move by United to get out from under its pension obligations, following a step taken successfully by US Airways Group Inc. in February, would clear 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." He said the agency concluded that cutting a deal would help United leave bankruptcy, and that it was in the best interests of those with pensions at United and taxpayers who fund the pension insurer.
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, 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."
Before the hearing, United Chief Financial Officer Jake Brace said the carrier has no choice but to seek the difficult action.
"All the work we have done and continue to do is about ensuring a healthy United for all our employees and our customers," Brace said. "That work enables competitive jobs and a successful future for our company."
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.
KSDK News (http://www.ksdk.com/news/business_article.aspx?storyid=79246)
That's one of the big things that's made the difference between profit and loss between the small newbie airlines and all the legacy carriers. This judge just opened the door to dumping billions owed in Pensions, and I bet you're going to see all the legacy carriers jumping right in with Ford and GM not far behind.
created: 5/10/2005 5:37:54 PM
updated: 5/10/2005 5:38:43 PM
CHICAGO (AP) --A federal bankruptcy judge in Chicago approved United Airlines' plan to terminate its employees' pension plans. His actions clear the way for the largest corporate-pension default in American history.
With scores of its concerned employees and retirees looking on, United Airlines told a judge Tuesday it has no choice but to shed billions of dollars of pension obligations in order to emerge successfully from bankruptcy.
At a packed hearing with broad implications for U.S. airlines and their workers, United asked a federal bankruptcy judge to approve an agreement shifting responsibility for its defined-benefit plans to the government's pension agency. The funds are underfunded by an estimated $9.8 billion.
Unless rejected by Judge Eugene Wedoff, it will be the largest corporate-pension default in U.S. history, topping Bethlehem Steel's $3.6 billion in underfunding in 2002.
The deal would be a blow to airline employees. The federally backed Pension Benefit Guaranty Corp., which has agreed to take over the pensions, would guarantee only about $5 billion of the benefits, meaning some employees would lose thousands of dollars annually off their pensions.
"It was not our first choice," said United's chief bankruptcy attorney, James Sprayregen. "But this deal, if approved by the court, solves any number of issues."
"We don't see an alternative to what we're proposing today and tomorrow," he said, referring to a separate hearing starting Wednesday at which United is proposing to overhaul its labor contracts over its unions' objections in order to impose lower pay and benefits.
United, which has been unprofitable since 2000, says terminating the pensions and replacing them with defined-contribution plans would save it $645 million per year, part of the $2 billion in annual savings it needs to secure exit financing to end its 29-month stay in Chapter 11 bankruptcy.
The effort to dump its pensions is being 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. A successful move by United to get out from under its pension obligations, following a step taken successfully by US Airways Group Inc. in February, would clear 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." He said the agency concluded that cutting a deal would help United leave bankruptcy, and that it was in the best interests of those with pensions at United and taxpayers who fund the pension insurer.
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, 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."
Before the hearing, United Chief Financial Officer Jake Brace said the carrier has no choice but to seek the difficult action.
"All the work we have done and continue to do is about ensuring a healthy United for all our employees and our customers," Brace said. "That work enables competitive jobs and a successful future for our company."
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.
KSDK News (http://www.ksdk.com/news/business_article.aspx?storyid=79246)
That's one of the big things that's made the difference between profit and loss between the small newbie airlines and all the legacy carriers. This judge just opened the door to dumping billions owed in Pensions, and I bet you're going to see all the legacy carriers jumping right in with Ford and GM not far behind.