Airline arouses pension fears
By Steve Halvonik
TRIBUNE-REVIEW
Friday, July 16, 2004
US Airways must deposit more than $110 million in two union pension funds in September -- a deadline the cash-strapped company will be pressed to meet, according to a local labor leader.
"It's scary for us,'' said Teddy Xidas, president of Association of Flight Attendants Local 40.
Xidas said US Airways Chief Executive Bruce Lakefield stirred pension fears in comments he made to union leaders at a two-hour, closed-door meeting Wednesday near Pittsburgh International Airport.
US Airways, which is seeking $800 million in wage and benefits concessions from workers, must contribute about $60 million to the flight attendants' pension fund and $50 million to $60 million to the mechanics' pension fund in September.
According to Xidas, Lakefield expressed concern that US Airways would have trouble meeting its pension payments while also maintaining sufficient cash to avoid defaulting on $750 million in federally guaranteed loans. Defaulting on the loans could plunge the airline back into bankruptcy.
"They're cash sensitive, and they said it's going to be very difficult for them to clear the hurdle because it puts them in jeopardy'' of loan default, Xidas said.
When asked whether US Airways would be able to meet its pension obligations, airline spokesman John Bronson said he could not comment.
Lakefield wouldn't divulge what he discussed with the flight attendants. But he did acknowledge that achieving new labor agreements by summer's end was critical to avoiding a loan default.
"I really think they could be in bankruptcy court by as early as September if they don't get the cost cutting they need," said Ray Naidl, airline analyst with Blaylock & Partners in New York.
International Association of Machinists union spokesman Joseph Tiberi said US Airways had not expressed any concern over pension payments to his union.
The mechanics union is the only US Airways labor group that has refused to return to the bargaining table. The flight attendants and the Communications Workers of America, which represents ticket, gate and reservations agents, agreed this week to join the pilots union in negotiating with the company.
The flight attendants and mechanics are the only two labor groups that still have defined benefit pension plans; US Airways terminated the pilots' defined benefit plan last year.
The pilots now participate in a defined contribution pension plan, as do ticket, gate and reservations agents represented by the CWA. Under these plans, the company makes a cash contribution to a 401(k) or similar investment plan each payday.
"I think all of the pension plans are a major target, and they're likely to be a sticking point'' in labor negotiations, said Marick Masters, a University of Pittsburgh business professor who is writing an academic paper about US Airways' labor relations.
If US Airways decides to terminate its pension plans for flight attendants and mechanics, it doesn't mean employees will have no pension. However, it is likely they will receive a lower pension than anticipated.
When US Airways terminated the pilots' pension, it turned the obligation over to the Pension Benefit Guaranty Corp., a federally sponsored agency that insures pension plans against default. Under this arrangement, US Airways pilots will receive a pension, but only a portion of what they had planned on getting, said pilots' union spokesman Jack Stephan.
"To go through your whole career planning your life decisions on what you thought you were going to get, and then to find out it's only going to be a fraction, is certainly devastating to go through,'' Stephan said.
Xidas said she believes US Airways would follow the same course and turn its obligations over to PBGC if it terminates the flight attendants' and mechanics' pension plans. It's a route the flight attendants want to avoid, and it was a big reason why the union decided Wednesday to return to the bargaining table.
"Pensions are a big issue to flight attendants,'' Xidas said.
US Airways isn't the only airline struggling with pension obligations. United Airlines, which is saddled with about $4 billion in pension obligations, said this week it would not make $72 million in payments to employee retirement funds.
According to a 2003 report by Fitch, the financial ratings agency, the airline industry has about $18 billion in underfunded pension obligations.
"The airline sector's pension problem is perhaps the most dire in corporate America,'' the report said.
Steve Halvonik can be reached at [email protected] or (412) 320-7993.
By Steve Halvonik
TRIBUNE-REVIEW
Friday, July 16, 2004
US Airways must deposit more than $110 million in two union pension funds in September -- a deadline the cash-strapped company will be pressed to meet, according to a local labor leader.
"It's scary for us,'' said Teddy Xidas, president of Association of Flight Attendants Local 40.
Xidas said US Airways Chief Executive Bruce Lakefield stirred pension fears in comments he made to union leaders at a two-hour, closed-door meeting Wednesday near Pittsburgh International Airport.
US Airways, which is seeking $800 million in wage and benefits concessions from workers, must contribute about $60 million to the flight attendants' pension fund and $50 million to $60 million to the mechanics' pension fund in September.
According to Xidas, Lakefield expressed concern that US Airways would have trouble meeting its pension payments while also maintaining sufficient cash to avoid defaulting on $750 million in federally guaranteed loans. Defaulting on the loans could plunge the airline back into bankruptcy.
"They're cash sensitive, and they said it's going to be very difficult for them to clear the hurdle because it puts them in jeopardy'' of loan default, Xidas said.
When asked whether US Airways would be able to meet its pension obligations, airline spokesman John Bronson said he could not comment.
Lakefield wouldn't divulge what he discussed with the flight attendants. But he did acknowledge that achieving new labor agreements by summer's end was critical to avoiding a loan default.
"I really think they could be in bankruptcy court by as early as September if they don't get the cost cutting they need," said Ray Naidl, airline analyst with Blaylock & Partners in New York.
International Association of Machinists union spokesman Joseph Tiberi said US Airways had not expressed any concern over pension payments to his union.
The mechanics union is the only US Airways labor group that has refused to return to the bargaining table. The flight attendants and the Communications Workers of America, which represents ticket, gate and reservations agents, agreed this week to join the pilots union in negotiating with the company.
The flight attendants and mechanics are the only two labor groups that still have defined benefit pension plans; US Airways terminated the pilots' defined benefit plan last year.
The pilots now participate in a defined contribution pension plan, as do ticket, gate and reservations agents represented by the CWA. Under these plans, the company makes a cash contribution to a 401(k) or similar investment plan each payday.
"I think all of the pension plans are a major target, and they're likely to be a sticking point'' in labor negotiations, said Marick Masters, a University of Pittsburgh business professor who is writing an academic paper about US Airways' labor relations.
If US Airways decides to terminate its pension plans for flight attendants and mechanics, it doesn't mean employees will have no pension. However, it is likely they will receive a lower pension than anticipated.
When US Airways terminated the pilots' pension, it turned the obligation over to the Pension Benefit Guaranty Corp., a federally sponsored agency that insures pension plans against default. Under this arrangement, US Airways pilots will receive a pension, but only a portion of what they had planned on getting, said pilots' union spokesman Jack Stephan.
"To go through your whole career planning your life decisions on what you thought you were going to get, and then to find out it's only going to be a fraction, is certainly devastating to go through,'' Stephan said.
Xidas said she believes US Airways would follow the same course and turn its obligations over to PBGC if it terminates the flight attendants' and mechanics' pension plans. It's a route the flight attendants want to avoid, and it was a big reason why the union decided Wednesday to return to the bargaining table.
"Pensions are a big issue to flight attendants,'' Xidas said.
US Airways isn't the only airline struggling with pension obligations. United Airlines, which is saddled with about $4 billion in pension obligations, said this week it would not make $72 million in payments to employee retirement funds.
According to a 2003 report by Fitch, the financial ratings agency, the airline industry has about $18 billion in underfunded pension obligations.
"The airline sector's pension problem is perhaps the most dire in corporate America,'' the report said.
Steve Halvonik can be reached at [email protected] or (412) 320-7993.
