Unite airline pension

United unions regroup from pension decision
By Jennifer Heldt Powell
Friday, May 13, 2005 - Updated: 08:40 AM EST

United Airline's move to shift its pension liability to taxpayers while trying to force more concessions from workers has devastated morale among its employees, local union leaders say.

The bankruptcy court approved a plan for the company to shift its pensions to the federal Pension Benefit Guaranty Corp., which will cover only a portion of the benefits.

The company was also in court this week hoping to force concessions from two unions.

``We've been trusting that our current senior management team has been attempting to restructure the airline so we could take pride in it,'' said Adam Thomas, the local leader of United's flight attendant union. ``Now it's apparent that they're trying to capitalize on the bankruptcy proceedings.''cw0

Workers stand to lose 50 percent of the pension benefits if the shift to the federal government goes through. Unions, however, are evaluating their legal options, Thomas said. ``Our fight is far from over,'' he said. ``We don't accept this decision as defeat.''

The union has threatened to initiate intermittent strikes if the pension plan is terminated. The International Association of Machinists and Aerospace Workers voted to strike if United rejects its contract.

Pensions

May 11, 2005

United Airlines wins pensions decision
By Andrew Ellson, Times Online

An American bankruptcy judge has ruled that United Airlines can walk away from $10 billion-worth of pension obligations to 120,000 current and former employees, in a move that could have wide-reaching implications for the pensions industry worldwide.


The decision, which marks the largest pension default in US history, shifts responsibility for United Airline?s four defined-benefit plans to the already over-stretched Pension Benefit Guaranty Corp (PBGC), the American government?s equivilent of the UK's recently established Pension Protection Fund (PPF).

United argues that the move, which will save the cash-strapped airline an estimated $645 million a year, is essential if it is to emerge from bankruptcy protection.

But Unions representing the 62,000 workers affected by the decision have threatened to strike because the PBGC would only guarantee about half of the $10 billion pension fund, meaning a much reduced retirement income.

The PBGC, which is already running a $23 billion deficit, initially opposed the plan and only agreed to drop that resistance in exchange for up to $1.5 billion in notes and convertible stock in the reorganised United Airlines company.

The judge's decision is sure to further the financial pressure on the PBGC because other troubled airlines may now look to follow United into bankruptcy to offload their pension liabilities.

The decision is also likely to add to calls for more funding for the PPF in the UK, which has already been criticised for vastly underestimating potential future liabilities.

Last month, Standard & Poor?s (S&P), the respected financial ratings agency, said that the PPF would quickly build a deficit, forcing it to raise its annual levy on companies with final-salary pension schemes.

And last year Ros Altmann, a governor of the London School of Economics, warned that the £20 million a year that the government had pledged to the PPF over the next two decades would buy average annual pensions of £6,000 for only 135 people each year - going by today's cost of annuities.

The PPF expects to receive £1.5 billion in assets and £1.8 billion in pensions liabilities every year with the £300 million shortfall covered by the levy on companies with final-salary schemes. But the study by S&P showed that claims on the PPF were likely to be as much as £890 million, much higher than anticipated.

Last month, the PPF was called in to help with the fallout of the collapse of MG Rover, where 6,000 workers lost their jobs. But yesterday the PPF announced that two of MG Rover's pension schemes have not yet met the qualifying criteria for entry into their "assessment period".

The PPF said the schemes are multi-employer arrangements and all participating employer's must have experienced an insolvency event to qualify and that this has yet to happen with the MG Rover Group Pension Scheme and the MG Rover Group Senior Pension Scheme.

The MG Rover Contract Related Pension Scheme, which is a single-employer scheme with the employer in administration, was accepted into the PPF assessment period.

In the United Airlines case, Judge Eugene Wedoff said the settlement did not violate any law or United?s collective bargaining agreement and he said that the airline?s employees might end up with fewer or even no benefits if no arrangement had been made and the company collapsed.

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

But Greg Davidowitch, the president of the Association of Flight Attendants (AFA), vowed to fight the decision.

"Over two-thirds of our members will lose 50 per cent of their benefits. Other airlines for competitive reasons will be forced to declare bankruptcy in order to force the PBGC to assume their obligations," he said.

The AFA said it had voted to authorise a series of strikes that could cripple the airline during the busy summer months. It is also considering legal options regarding an appeal.

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