Cal Next Airline To Screw Employees

[kiowa]

Houston-based Continental (CAL: news, chart, profile) said late Friday it is exercising its option under federal legislation that allows it to suspend contributions during economically difficult times. High fuel costs and financial woes in the industry drove its decision, the airline said.

"Using the relief afforded by the Pension Funding Equity Act is the prudent course of action," a Continental representative said.

Congress passed the act last spring to help lift the airline and steel industries through these turbulent times. Right now, Continental has the smallest pension obligation of the big six U.S. carriers, according to a recent Bear Stearns research report.

The carrier had a required minimum payment of $17 million due this year. It had originally planned to contribute $250 million to maintain the plan's funding at 90 percent of its current liability. At the end of 2003, Continental's pension plan was underfunded by $1 billion, the Bear Stearns report noted.

 

[JFK777]

Since Lorenzo left houston CAL has had to be the best US airline to work for. I don't endorse waivers of pension fund payments, but compared to the US, DAL, UAL( loosing all their ESOP value) or AA people, CAL's been super. I"m sure their was a time when working for Alitalia looked favorable but not today. Be thankful for what you have CAL people you could work at a CH 22 or 33 or 11.

 

[Fly]

Continental skips pension payment
Airline seeks to conserve cash with soaring fuel costs
By Matt Andrejczak, CBS.MarketWatch.com
Last Update: 6:02 PM ET Sept. 3, 2004


SAN FRANCISCO (CBS.MW) -- Continental Airlines will skip contributions to its pension plan this year to conserve its cash as soaring fuel prices hobble carriers.

Houston-based Continental (CAL: news, chart, profile) said late Friday it is exercising its option under federal legislation that allows it to suspend contributions during economically difficult times. High fuel costs and financial woes in the industry drove its decision, the airline said.

"Using the relief afforded by the Pension Funding Equity Act is the prudent course of action," a Continental representative said.

Congress passed the act last spring to help lift the airline and steel industries through these turbulent times. Right now, Continental has the smallest pension obligation of the big six U.S. carriers, according to a recent Bear Stearns research report.

The carrier had a required minimum payment of $17 million due this year. It had originally planned to contribute $250 million to maintain the plan's funding at 90 percent of its current liability. At the end of 2003, Continental's pension plan was underfunded by $1 billion, the Bear Stearns report noted.

Pension contributions are a hot-button issue for airlines following the recent decision of United Airlines (UALAQ: news, chart, profile) to suspend its payments while it remains in bankruptcy. US Airways (UAIR: news, chart, profile) and Delta (DAL: news, chart, profile) are also looking at changes to their pension plans as they seek to avoid bankruptcy.

By electing to not make pension payments, Continental expects to achieve an unrestricted cash balance of $1.5 billion at year's end. The airline ended the June 30 quarter with unrestricted cash of about $1.7 billion.

Analysts say surging oil costs are expected to burn the unrestricted cash reserves of airlines this year.

Shares of Continental closed Friday down 13 cents at $9.57.


Matt Andrejczak is a reporter for CBS.MarketWatch.com in San Francisco.

 

[goingboeing]

Looks like the ghost of Frank Lorenzo has been resurrected at CAL.He has already been roaming in the halls at AA -DFW- HDQ.

 

[wings396]

Nobody at ANY Airline is safe from this stuff anymore. Since the Government handed out Billions to the Airlines, they should put a quick stop to this. They next industry trend will be taking the health benefits away from retirees.

 

[jimntx]

Earth to Wings , the termination of medical benefits for retirees has been going on for several years now and not just in the airline industry. Halliburton (is that name familiar?) dropped medical benefits for retirees this year, and then sued 3 former employees who filed a complaint over the action.

I still say, though, that you need to wait until next year before passing judgement on CO's action. If they try to avoid making the payment at all, that is one thing, but right now with the fuel situation, etc., it is viewed as the prudent AND legal thing to do.

Continental has been very good to their employees over the past 10 or so years. When Bethune came in, their management-employee relations were like AA or US Airways--neither side believed a word the other said. He worked very hard to change that and succeeded.

Any B school (College of Business Administration) will tell you that the hardest job ever is to change an entrenched corporate culture--particularly if it is negative. It is always easier to take a negative view of any action or to come up with reasons why an idea won't work. That is not what happens at CO today.

Why ever, now that he is retiring, would Bethune want to destroy his legacy by tearing down what he worked so very hard to build up?