Fianl "Touches" to the Iraq spending bill

[The Goose]

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From the Wall Street Journal, 24 May 2007:

WASHINGTON -- A nearly $120 billion Iraq-war spending bill headed toward the House floor after chemical and airline industries won concessions and Democrats divided up billions of dollars in added funding for domestic programs.

In the final bargaining, AMR Corp.'s American Airlines won a provision promising significant pension relief for itself and rival Continental Airlines Inc.

Under a provision added to the war bill, American, Continental and some regional carriers should qualify for a flat 8.25% rate, still less than Northwest and Delta but about 2.25 percentage points above what they would have faced when the new pension rules are in place.

"Every airline is born with their hand out," said House Appropriations Committee Chairman David Obey (D., Wis.)

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This is just a snippet of the entire article.

This is quite a large chunk of change on a yearly basis (cuts required pension contributions considerably, I believe) and will no doubt figure prominently in executive bonus calculations (due to a smaller yearly cash outlay and corresponding increase in stock price) unless our unions get a piece of this windfall for the workers.

Note this has only cleared the Senate - the bill hasn't been blessed by the House yet. The president will, no doubt, sign the bill (opinion); AMR (Fort Worth) and Continental (Houston)

Someone please correct me if I'm in error with the numbers.

ps: I still want a F(amilies) U(nder) R(educed) P(ay) button.

 

[eolesen]

It's beneficial, but I wouldn't get too excited about the "windfall" this will bring. If I'm reading this correctly, all this does is fix the rates of return used in estimating growth of the existing pension funds and projecting the point at which the funds are considered fully funded.

Assuming 8.25% interest growth vs. 6.0% interest growth will mean lower overall contributions, but more importantly, it will prevent AMR from unintentionally overfunding the pensions if the actual rates of return wind up being higher than the 6%.

 

[AMFAMAN]

Also added to the bill was a increase in minimum wage to $7.25 an hour. Congrats to our twu represented title 2 building and cabin cleaners on their raise. Makes you wonder why they have to pay dues?

 

[Wretched Wrench]

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From the Wall Street Journal, 24 May 2007:

WASHINGTON -- This is quite a large chunk of change on a yearly basis (cuts required pension contributions considerably, I believe) and will no doubt figure prominently in executive bonus calculations (due to a smaller yearly cash outlay and corresponding increase in stock price)

Um, does that mean they get more and we get less?

.

 

[The Goose]

Um, does that mean they get more and we get less?

.

More than likely.

 

[LGA Fleet Service]

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"Every airline is born with their hand out," said House Appropriations Committee Chairman David Obey (D., Wis.)

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Someone should let the gentleman from Wisconsin know that unlike most of the US airline industry AA and Continental didn't foist off their pension obligations on the government...

 

[TIME FOR CHANGE]

Someone should let the gentleman from Wisconsin know that unlike most of the US airline industry AA and Continental didn't foist off their pension obligations on the government...

Not Yet Anyway

 

[The Goose]

It's beneficial, but I wouldn't get too excited about the "windfall" this will bring. If I'm reading this correctly, all this does is fix the rates of return used in estimating growth of the existing pension funds and projecting the point at which the funds are considered fully funded.

Assuming 8.25% interest growth vs. 6.0% interest growth will mean lower overall contributions, but more importantly, it will prevent AMR from unintentionally overfunding the pensions if the actual rates of return wind up being higher than the 6%.

You're correct about the return rate for calculation purposes.

However, the 2.25% difference applied to a few billion bucks is nonetheless a rather large amount. A follow-up article in the WSJ states the PBGC estimates savings (bucks in the companys' pockets) to be $2 billion+ over ten years with respect to both AA and CO. While it's an amount none of us would mind having in our personal bank accounts, relatively speaking it's not that great an amount, but still something I hope will be considered during negotiations as a part of the overall picture.

 

[LGA Fleet Service]

Not Yet Anyway

Very true.

 

[FWAAA]

Very true.

If AA was gonna screw the pilots* by terminating the pensions and turning it over to the PBGC, that would have already happened.

This legislation has the potential to make the DB plans even cheaper for AA than they currently are - see my previous threads explaining just how much cheaper they are than, say, Southwest's Defined Contribution plans.

*Pilots are the only real losers upon pension plan termination, as practically nobody else has a pension exceeding the PBGC maximum - except for maybe the rare mechanic who started early and retired early.

 

[The Goose]

If AA was gonna screw the pilots* by terminating the pensions and turning it over to the PBGC, that would have already happened.

This legislation has the potential to make the DB plans even cheaper for AA than they currently are - see my previous threads explaining just how much cheaper they are than, say, Southwest's Defined Contribution plans.

*Pilots are the only real losers upon pension plan termination, as practically nobody else has a pension exceeding the PBGC maximum - except for maybe the rare mechanic who started early and retired early.

With regard to the "new and improved" bankruptcy laws of October 2005, I've read in more than one place it may be more difficult now for companies to unload their DB plans to the PBGC than before, more than likely the motivation for NWA and DL to file before the deadline.

Does anyone have a link to good advice/facts re: the new BK laws as compared to the old?

 

[FWAAA]

With regard to the "new and improved" bankruptcy laws of October 2005, I've read in more than one place it may be more difficult now for companies to unload their DB plans to the PBGC than before, more than likely the motivation for NWA and DL to file before the deadline.

Does anyone have a link to good advice/facts re: the new BK laws as compared to the old?

You're entirely correct - there were many posts about the law's changes in late 2005 around the time NW and DL filed. Some of the changes mean that debtors will get a much shorter time to reject or affirm leases and other contracts, it will be more difficult to enact exhorbitant executive comp plans designed to retain key execs and the timetable for exit can't be indefintely extended like UAL's 3+ year odyssey.

AA missed that boat. Intentionally. With about $6 billion in cash and billions spent on debt reduction and over $1 billion in pension contributions since UA stopped contributing to its plans, AA isn't staring down Ch 11 anymore.

jetBlue is much closer to a restructuring than AMR. B6 has total debt and capital lease obligations which are more than annual revenue. AMR's total is less than half of this year's revenue and going down. B6's debt is going up.

Some perpetually disgruntled will keep banging the "AA is about to file Ch 11 and screw everybody again" drum, but they just don't have a clue. Make no mistake - AA will probably screw everyone again, but it won't be in a bankruptcy proceeding.

 

[LGA Fleet Service]

They're probably wishing they had filed chapter 11.

After all, there is no longer a stigma attached to it, it's now viewed as a master stroke for management to obtain all of its cost cutting goals without the pesky voices of labor being paid heed to.

I'm sure there are studies floating around in DFW detailing what the AMR operating results would be if we had the post bankruptcy cost structure of DAL,NWA or US Airways.

AA management is driving this place right into the ground, and they are content with the status quo.

"Passengers value an on time departure, who cares about the filth in the cabin?"

All these 'CEL''JLT' and 'PLI' groups are bovine scatology.We don't need focus groups, we need boots on the ground.We need leadership,not people so paralyzed by fear of going against the grain they don't dare make a suggestion that goes against the company line.


Why form a useless committee to analyze why customer satisfaction is down across the board?

This is a customer service driven business, how hard is it to focus on the customer and how to keep them happy?


Tired of this sh!t, seriously.

 

[Wretched Wrench]

*Pilots are the only real losers upon pension plan termination, as practically nobody else has a pension exceeding the PBGC maximum - except for maybe the rare mechanic who started early and retired early.

Nope on just mechs who started early having higher-than-PBGC benefits. I started here after military service, A&E school, some college and two other jobs. I have already passed the age where I can retire early. My retirement will be in excess of the PBGC minimums.

Nope (again) on the mech retiring early having a higher retirement. Whether a mech retires early or not, the PBGC benefit is determined by his age at plan cancellation, not when he retired. So, a mech retiring early would be have a lower retirement for two reasons: 1. He would have fewer years in the plan. 2. There would be an actuarial reduction.

.

We need to keep in mind that the jiggering of the formula reduces the funding of the retirement for all of us non-SERP employees, not just pilots.

.

 

[TIME FOR CHANGE]

Some perpetually disgruntled will keep banging the "AA is about to file Ch 11 and screw everybody again" drum, but they just don't have a clue. Make no mistake - AA will probably screw everyone again, but it won't be in a bankruptcy proceeding.

History in the making
A post by FWAA that one can agree with