Its Official, ALPA Caves In

Zephyr

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Feb 11, 2003
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Per the MEC directive…
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BE IT FURTHER RESOLVED that the Negotiating Committee is charged with investigating with management, and designing on an expedited basis, a follow on retirement plan that achieves the maximum level of benefits, on an equitable basis, for the greatest number of US Airways pilots..[/blockqoute]
There is a lot of rhetoric from all fronts, but the facts boil down to a real simple and undisputed reality, namely: The company cannot abandon it’s pension obligations without the EXPRESS CONSENT of the pilots to agree to make void the current obligations. Otherwise the company would have done so long ago and would not have entreated the judge to get permission to do so (which permission the judge refused to grant.)
Color it however you wish, and add as much blather as you like, it matters not; the outcome is now certain.
ALPA has caved… again.
 
Zephyr:

I'm not sure I would agree with your comments.

Reports indicate there may be a way to save the defined benefit plan (which requires modification of the contract, negotiation between the parites, and PBGC discussions).

However, if ALPA elects to change from the DB to the DC plan, reports indicate the company has "sweetened" their DC offer, and the airline is willing to commit at least $40,000 per year per pilot to a DC plan.

In addition, the company's proposal now calls for any amounts paid above the IRS limits of $40,000 per year will be placed into a "notional" account and paid to the pilot at retirement as a non-qualified benefit.

Amounts paid at or below $40,000 per year will be placed into a qualified DC account in the pilots name and controlled by the individual, versus a Fund Manager.

It's interesting that there appears to be more than $850 million available to fund a pilot pension plan and ironically to some pilots, they may actually prefer the new DC plan over the DB plan.

Why? The pilot controls the money, which could be equal to or greater than $1 million upon retirement now that future lump sum DB accruals have been eliminated per LOA 84.

Chip
 
Chip,

If the company is not certain to reduce its current obligations (which of course are already less than they were just a number of months ago) the company would not be meeting with the pilots. And if the MEC had no intention to further amend (alleviate) the pension obligations, then they would not have charged the Negotiating Committee. The Neg Com would be flying the line.

We can add as much color as we wish, or point out how some pilots will actually receive more. (Are we to be surprised?! That is how you separate a union, take from Peter, give half to yourself, and give the other half to Paul.) When you do all the algebra, the bottom line is less for the pilots, more for Austin.

ALPA has agreed to further concessions again. Whether or not the MEC should have taken this course of action will be debated.

Some will disagree with what the MEC has done; others will attempt to justify their actions. But all of the conversation and argument will be subsequent to the fact…ALPA has agreed to further concessions.

Zephyr
 
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On 3/5/2003 10:31:01 PM chipmunn wrote:


It's interesting that there appears to be more than $850 million available to fund a pilot pension plan and ironically to some pilots, they may actually prefer the new DC plan over the DB plan.

Why? The pilot controls the money, which could be equal to or greater than $1 million upon retirement now that future lump sum DB accruals have been eliminated per LOA 84.

Chip
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Chip,
I TOTALLY agree with this statement. We need a DC plan NOW, for the simple reason it would prevent this "snatch and grab" scheme of management from occurring again when the funds get tight. What I don't agree with on the part of the company is the lousy funding levels they originally proposed. It sounds like if that's going to be fixed, then that's the direction to go! The way I figure it, $40,000/pilot/year is WAY more than the original funding level, on the order of about 1/3. This would make a HUGE difference in the pilot retirement.
 
Zephyr:

Again, I'm not sure I agree with your description, but I believe the real thought is how des one define a win?

Let's look at a chronological sequence of events to answer this question...if possible.

To avert the pension hearing process, the company offered the pilot group a "sweetened" deal the night before the proceeding began with reports this offer included more money and the possibility the DB plan could be saved, but the MEC rejected the overture.

Next after four days of testimony, the bankruptcy court issued a split ruling. The court said the company met the financial requirements of a "distressed termination", but could not use the courts to violate a CBA and let ALPA's grievance proceed.

The first step of the grievance process is scheduled to begin with a System Board hearing in front of US Airways vice president of flight operations, Captain Ed Bular, a ALPA pilot with a management exemption, on March 12.

The grievance process will go forward and could take up to six months to complete.

Therefore, where are we? Both parties have a lot of pressure to complete a deal and both parties can shut the airline down. There is a “raging battleâ€￾ going on within the MEC and the pilot group and it's to early to tell where this will lead, but for someone to say the pilots have "caved" is wrong.

The MEC is responsible to obtain the best possible deal for its membership and is proceeding accordingly and at this point it's to early to tell how this story will end. Another words don't assume there will be an agreement because this emotionally charged issue may not have logic involved.

Finally, I have talked with a number of people involved with the negotiations and those who have crafted ALPA’s proposals and there are creative ideas to solve the problem, but when there are multiple parties (PBGC, US Airways, IRS, ALPA and the bankruptcy court) involved in a short negotiation it’s difficult to predict an outcome.

Chip
 
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On 3/5/2003 10:31:01 PM chipmunn wrote:

Zephyr:

I'm not sure I would agree with your comments.

Reports indicate there may be a way to save the defined benefit plan (which requires modification of the contract, negotiation between the parites, and PBGC discussions).

However, if ALPA elects to change from the DB to the DC plan, reports indicate the company has "sweetened" their DC offer, and the airline is willing to commit at least $40,000 per year per pilot to a DC plan.

In addition, the company's proposal now calls for any amounts paid above the IRS limits of $40,000 per year will be placed into a "notional" account and paid to the pilot at retirement as a non-qualified benefit.

Amounts paid at or below $40,000 per year will be placed into a qualified DC account in the pilots name and controlled by the individual, versus a Fund Manager.

It's interesting that there appears to be more than $850 million available to fund a pilot pension plan and ironically to some pilots, they may actually prefer the new DC plan over the DB plan.

Why? The pilot controls the money, which could be equal to or greater than $1 million upon retirement now that future lump sum DB accruals have been eliminated per LOA 84.

Chip
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[/blockquote]

I agree. This sounds encouraging to me. How come everytime I suggested that employees might PREFER a defined contribution plan, I was attacked or undermined? Why on earth would anyone CHOOSE to put their retirement in the hands of an AIRLINE????? My motto is "GIVE ME THE MONEY"
 
Well, the most telling indicator about the pilot pension issue, on this board at least, is that Capt. Munn has revived his rational rhetoric. Quite a change in tone, huh?

It's like day and night! Or Capt. Munn and Mr. Chip?

oh, the power of words.
 
Chip,

Because of Bush’s policy toward Iraq, the cost of oil is flirting with all time highs, and expected to go higher still in as little as a week or two, and certainly within a couple of months. The airline industry is suffering from huge overcapacity, and extremely week bookings (hence the draconian layoffs in the past year and more threats of layoffs even now). The week economy and threat of war will only continue to put negative pressure on revenue opportunities that are already scarce. The airline debt structure is burdensome and serves only to increase the cost of operating, and if an airline should need more loans to keeps its doors open, then the cost will increase at an exponential rate. Employee discontent and low morale certainly does not add to the efficiency of operations. And management nepotistic largesse contributes nothing positive to the bottom line. (oh what FUD)

Ubiquitous are the circumstances that envelope US Airways, and one can point to any of them to use as flowery decorations for an argument for or against the decision of the MEC to agree, in principle and by express directive, to further reduce US Airways’ pension obligation.

As I said, people will agree with or disagree with the MEC’s position and course of action, and I would expect there might even be a little bit of emotionalism. Yet the fact remains that all of the debate is subsequent to the MEC’s decision to give more. Previous to this MEC directive, the debate could address whether or not ALPA should retain its contract, or abandon its contract. That debate has now been silenced by the MEC. That question is decided. They have chosen to abandon their contract and give more.

The only debate now is how much to give and from whom it should be taken. The MEC eloquently put it this way, “...a follow on retirement plan that achieves the maximum level of benefits, on an equitable basis, for the greatest number of US Airways pilots...â€

ALPA has a rich tradition of excluding pilots that are not part of the “greatest number of US Airways pilots†for the benefit of those pilots who are included in the “greatest number.†(All pilots are equal, but about 51% are more equal than others.)

The debate, by MEC directive, is now how much to give and whom shall we appoint to contribute to the “greatest number.â€

ALPA has chosen to cave, only the "how much and who" remains the question.

Zephyr
 
Zephyr:

If it's possible within the timeline, the MEC will undoubtedly send any agreement out for membership ratification, where a vote result is far from certain.

By the way, do you consider it caving if a DC plan can provide up to a lump sum of $1 million versus having a DB plan with a $11,000 per month annuity?

Finally, ALPA rank-and-file emotion is very high and there are many pilots, maybe the majority, who advocate shutting the airline down unless their requirements are met. Let's not forget, the judge has provided ALPA with the ability to extend the negotiation past March 31.

Chip
 
Chip wrote:
If it's possible within the timeline, the MEC will undoubtedly send any agreement out for membership ratification, where a vote result is far from certain.

Zephyr writes:
The suggestion of a vote is irrelevant to the title of the thread. “Its Official, ALPA caves in†Whether or not ALPA rank and file are allowed to vote on the next round of reductions does not change the fact that the MEC has dispatched the Neg Com to “design on an expedited basis, a follow on retirement planâ€. They have chosen to dispatch the Neg Com with all authority and express direction. ALPA has in fact caved. “How much and who?†is the only question left.

Chip Wrote:
By the way, do you consider it caving if a DC plan can provide up to a lump sum of $1 million versus having a DB plan with a $11,000 per month annuity?

Zephyr writes:
The MEC has dispatched the Neg Com to “design on an expedited basis, a follow on retirement planâ€. It cannot be anymore clear. Unless the MEC had agreed in principle to abandon the current pension provisions, they necessarily would not have been able to dispatch the Neg Com with the directive to “design a follow on retirementâ€. They have abandoned the pension as it now is and have directed the Neg Com to seek a different one that is best for the “greatest number of US Airways pilots†(and understood in that is “greatest number ELIIBLE to voteâ€). ALPA has caved. “How much and who?†is the only question left.

Chip Wrote:
Finally, ALPA rank-and-file emotion is very high and there are many pilots, maybe the majority, who advocate shutting the airline down unless their requirements are met. Let's not forget, the judge has provided ALPA with the ability to extend the negotiation past March 31.
Chip


Zephyr writes:
Agree to conclude negotiations before March 31 if you like. Insist to negotiate until December if you like. In either case it does not matter, the MEC has agreed to negotiate which presupposes that they have chosen to abandon the current pension. They have caved.

The debate is over. The MEC has decisively, and completely accepted Mgts presupposition that ALPAs pension must be abandoned. They have lost hope in pursuing other means of retaining the current pension. Having accepted this presupposition, the MEC has directed the Neg Com to take from the “smaller number†to mitigate the impact on the “greater numberâ€.

It is very simple. What they have done is clear.

Many will debate about it. Some will try to justify it. Some will explain how it is wrong. And still some will attempt to ignore it. It does not change what is written.

ALPA caved. In effect, MGT said “Jump.†And the MEC responded, “OK, sir. But lets talk about how high and who will do it for us.â€

In conclusion, (don’t you like trasitoins!) history has shown, if the “greater number†is loud enough in their own justifications, they need not suffer their ears to hear the position of the “lesser number"... That is until they themselves inevitably become one.

It is official, ALPA caved. As they squabble about “how much and who†(all in closed sessions), let the “lesser group†take notice, and go see the doctor about the ringing in their ears. And then use the time off to find another job, because they are about to be cast overboard.

Zephyr
 
Just wondering, didn't a bankrupt steel company try to end the DB plan for it's retired workers a few years back. I believe they offered to fund a new DC plan while sticking the government with the pension payments through the pension insurance program. I believe the government said no, and won in Federal Court. Isn't this plan by your management the same kind of thing?
 
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On 3/6/2003 8:08:25 PM RJStud wrote:

Just wondering, didn't a bankrupt steel company try to end the DB plan for it's retired workers a few years back. I believe they offered to fund a new DC plan while sticking the government with the pension payments through the pension insurance program. I believe the government said no, and won in Federal Court. Isn't this plan by your management the same kind of thing?
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Correct. LTV was the company, and the PBGC forced them to take back the DBP. The PBGC will not allow a company to terminate a plan and then make the beneficiaries whole through a combination of the PBGC guarantee and a follow-on plan of any type.

In its filing in response to the motion to terminate, the PBGC did say something to the effect that US Air's planned follow-on DC plan for the pilots was probably as "generous" as they could accept and still approve the termination.

However, if ALPA can avoid a plan termination (say, by freezing the current plan), then this restriction becomes moot.

Andy S.
 
Zephyr:

ALPA's current position with the company is to first determine if the DB plan can be saved and have the company make the required payments to prevent a distressed termination.

I believe it's important to note on the evening before the first pension bankruptcy hearing, management provided ALPA with a "sweetened" offer and indicated there may be a way to save the current retirement plan.

If the company and NC cannot save the current DB plan, then the MEC will work to find a way to protect the target benefit that was to be paid under the DB plan.

The challenge is the follow-on plan (for some pilots) may not provide the full level of benefits as the DB plan. However, with all due respect, some creative DC plan scenarios currently being discussed between the parties, will achieve the same or maybe better results than the approximate revised DB pension benefit negotiated in LOA 84.

Therefore, if the parties can reach an agreement that provides the same dollar figure as negotiated in LOA 84, which has a DC lump sum versus only an annuity option, some pilots may be better off and actually prefer the new DC retirement plan.

Chip
 
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On 3/8/2003 1:57:32 PM chipmunn wrote:

...some pilots may be better off..
Chip
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[/blockquote]

I could not have made my point so well. Thank you Chip.

Please keep coloring, and decorating the conversation. Maybe everyone will forget what the US Air MEC has done. At least you can hope. Maybe Flying the Line Three will never be written.

Zephyr