Judge gives mixed ruling in U.S. Airways pension case
By MATTHEW BARAKAT
AP Business Writer
A bankruptcy judge agreed Saturday to allow U.S. Airways to terminate its pilots' pension plan, but said his ruling will be subject to the pending decision of an arbitrator.
The pension issue is the last hurdle U.S. Airways faces in its plan to emerge from bankruptcy by March 31. U.S. Bankruptcy Judge Stephen Mitchell's ruling means that the airline has not yet completely cleared that hurdle and will be under immense pressure to resolve the pension issue quickly.
U.S. Airways spokesman Chris Chiames said this is the next step.
"We think this is an important ruling because it allows us to stay on track. We're calling on ALPA to join us in immediate negotiations," he said.
Roy Freundlich, a spokesman for the Airline Pilots Association, said the union is pleased that an arbitrator will decide if terminating the plan violates the pilots' collective bargaining agreement.
The key issue is whether the pilots' union agreed to allow the airline to terminate the pension plan in a secret agreement reached back in December.
In the agreement, management promised to begin a new, smaller pension plan if the old one were terminated. They kept the agreement secret because if it became public, they thought it would torpedo efforts to get Congressional legislation to fix their problem.
But union and management differed on the agreement's meaning. U.S. Airways said the letter constituted acquiescence from the pilots to termination of their plan.
But the union said the agreement was only designed to give them protection in the event that the federal Pension Benefit Guaranty Corp. instituted efforts to terminate the plan.
Judge Mitchell said Saturday that it was a close call but sided with the union on its interpretation.
On all other matters, Mitchell sided with the airline. He agreed that the airline faces imminent threat of liquidation if it does not resolve the pension issue and he agreed that the airline does not have the money to fully fund its pension plan.
U.S. Airways said the March 31 deadline is critical because it cannot receive $1.24 billion in financing until it emerges from bankruptcy and that it could run out of cash without financing.
U.S. Airways has its largest hub in Charlotte, N.C., where it employs more than 7,000.
Mitchell heard four days of testimony and did not rule until 8 p.m. Saturday. This came after several pilots testified about how much money they would lose if U.S. Airways is allowed to proceed with its plan.
Charles Couch, of Landenberg, Pa., said his annual pension would drop from $65,000 to $30,000 a year.
"It puts me in a dilemma where I can't afford to retire. ... I would have to find another job" after retiring from the airline, he said.
The union said most pilots would receive annual benefits of $50,000 to $70,000 a year under the old plan. Under the new plan, those benefits could be cut in half.
About 18 pilots stood to receive lump-sum benefits of $1-2 million just days from now. Those benefits are now on hold.
An arbitrator is scheduled to hear the issue March 13. The final hearing for U.S. Airways to emerge from bankruptcy is scheduled for March 18.
U.S. Airways said the pilots' pension is underfunded by about $800 million over the next seven years.