C
chipmunn
Guest
Yesterday U.S. Senator Arlen Specter (R-PA) meet with the US Airways ALPA MEC and union members in Pittsburgh and then he and fellow Pennsylvania Senator Rick Santorum (R-PA) held a Senate Appropriation Committee’s - Subcommittee on Labor, Health, Education and Human Services hearing on US Airways underfunded pilot retirement plan.
The hearing had two panels of witnesses. The first panel consisted of Steve Kandarin, PBGC Exeuctive Director and Jim Keightley, PBGC General Counsel. The second panel consisted of Jim Roddey, Allegheny County Chief Execuitve, Dave Siegel, US Airways CEO, Captain Duane Woerth, ALPA President, and Captain Bill Pollock, US Airways MEC Chairman.
The hearing began with a short opening statement from Specter followed by prepared marks from Kandarin. Specter and Santorum then grilled the two PBGC representatives for about an hour disputing everything the PBGC representatives presented.
Kandarin and Keightley’s contention is if US Airways restoration plan is approved that it may set a precedent that could sometime in the future be used by other companies to hurt the defined benefit pension plans of 44 million other people covered by similar retirement plans. However, when pressed by Specter, these two men could not provide any scenario(s) as to how that could happen.
Specter then strongly pressed the PBGC representatives as to whether there are provisions under the statutes that govern the PBGC that would keep them from allowing US Airways to restructure the pilot pension plan and they reluctantly agreed that there wasn’t. Therefore, these two men have unilaterally decided (although it’s likely there has been Bush Administration input led by Secretary of Treasury Snow) to not to allow US Airways to proceed with its restoration funding plan because they didn't feel there was language in the statutes that would allow this option to proceed.
Specter asked Kandarin if the pilot pension fund was distressed terminated what would be the obligation to the PBGC and taxpayers and he responded “$500 million and if all US Airways pensions were terminated $2 billion.†Specter asked the PBGC representatives, “wouldn't it make more sense to everyone if US Airways were allowed to restructure their plans so as to not default on it?†Interestingly, Kandarin and Keightley could not provide an honest and straight-forward answer to the question.
Next Specter asked the PBGC representatives if congress had ever given the PBGC bailout money because the federal employee pension funds were underfunded. Reluctantly Keightley and Kandarin agreed that in 1974 congress authorized a federal bailout of federal government pension funds, that cover both Kandarin and Keightley’s pensions, however, the federal government never touched the line of credit because market conditions improved.
Does this seem like a double standard?
Specter then called the former PBGC General Counsel to testify, who interestingly is the same individual that wrote the PBGC Statues and he testified that “the statues were intentionally left vagueâ€. He said the statutes were written to provide leeway for the PBGC to extend consideration in case of unusual cir***stances such as what US Airways has encountered after September 11 and the great strides that have been taken at the company to restructure. He said the PBGC was wrong to stop the company’s pension restoration efforts and should allow the plan to be restructured.
>From this observer’s perch, I find it interesting that the man who wrote the statute agrees with the pilot retirement restoration plan funding agreement.
The two bureaucrats disagreed and the Specter said what we have here is “bureaucratic intringence†and the Senator was notably upset with the PBGC’s position.
At this point it was obvious to those in attendance that these two PBGC officials currently had the power and authority to approve US Airways restoration funding request when Kandarin said there is “no (statute) language we cannot do this.†However, it was readily apparent the PBGC is not going to change their mind and the only way the pilot pension can be saved is through legislative action.
At this point the next panel of speakers where called to the witness table where Roddey was first to speak and he provided prepared remarks on the importance of US Airways to Pennsylvania and the East Coast.
Roddey was followed by Siegel who said the pilot pension plan, as it now stands, would not allow the company to successfully emerge from bankruptcy. Siegel said that it was the pilot’s portion of the plan that was in jeopardy and the “rest of the employee plans were O.K.†He then stated that the Alabama Retirement Fund and US Airways agreements with Credit Card Companies have forced the airline to have a very tight time line to emerge from bankruptcy. Siegel continued that since the PBGC had not granted the restructuring of pilot’s retirement, then they had no choice but to terminate the plan to emerge from bankruptcy. Siegel said he would attempt to negotiate a new plan with ALPA.
PBGC guidelines require 60 days notice of an employer’s intention to terminate a plan; therefore, if US Airways intends to emerge from bankruptcy by March 31, the company would have to terminate the pilot retirement plan by January 30, but this would violate the pilots contract.
The next two witnesses were Woerth and Pollock who gave excellent speeches on the company and industry problems and Woerth said the “pilots were very pragmaticâ€. The US Airways pilots have provided $566 million in annual savings and have agreed to two pension cuts. The first cut came during the restructuring agreement where their pay cuts up to 37 percent would lower final average earnings (FAE) and retirement pay outs and the second cut was in the modified restructuring agreement. This cut reduced the defined benefit multiplier by 1.8 percent and capped the pay out at 50 percent of FAE. This reduction provided US Airways with another $77 million per year in savings for a total of $643 million per year, which represents the single largest union concession in the history of the airline industry.
Following the prepared statements Specter then asked Siegel what could happen to the pilots retirement plan and in most observers view Siegel “torpedoed†the legislative movement to save the pilots pension. Siegel said he advised ALPA that the pilots pension plan might have to be terminated and replaced with a defined contribution plan. Specter then asked Siegel what would the pay out be and Siegel said it would be lower than the second retirement cut. Specter seemed to be caught off guard by Siegel’s remarks, but after the meeting ALPA made it clearly known to both Santorum and Specter that either by accident or more likely by design Siegel pulled the “rug out from the argumentâ€.
Why? It is in the company’s best interest to have the pilot’s pension plan “distressed terminated†because the company would not have to pay $300 million per year for the next seven years plus $1 billion per year for the next 30 years to properly fund the plan. However, many people believe this argument is flawed because US Airways pension shortfall is due to five issues: September 11, the government imposed closure of Washington National Airport, interest rates at 41 year lows, the strongest and most sustained stock bear market, and the sluggish economy. These issues are either one time or cyclical events that will likely cure them self and permit the fund to be adequately funded in the future, maybe without any future US Airways funding action. In fact, in 2001, just two years ago the pilots pension was over funded at 104 percent and the company has made every required contribution in the history of the fund.
At the conclusion of the hearing Specter said he and Santorum would continue their work for a legislative solution to the problem and there would be another hearing on January 16, and presumably he would introduce legislation to force the PBGC to accept US Airways retirement fund restoration plan.
In an interview with reporters following the hearing Siegel said, “We don't have a lot of time, probably a couple of weeks. Either way, there will be a solution to the problem that allows us to successfully emerge†from bankruptcy. However, “Any protracted legislative process will simply be too late to accommodate the very tight timeline of our emergence plan. The time that we have to resolve this is very short. The airline’s equity sponsor and other lenders expect a resolution to this matter within days, not weeks or months.
Meanwhile, following the hearing US Airways ALPA spokesman Roy Freundlich disputed Siegel’s comments when he told reporters, “The company has the habit of accelerating timelines to the point that labor-friendly solutions cannot be reached. We have enough time to pursue a legislative solution and we’re going to continue on that track. We're not interested in a company solution that guts our pension plan. The hearing on Thursday (bankruptcy hearing for the court to approve the disclosure statement to permit US Airways to merger from bankruptcy by March 31) is not on the reorganization plan itself. We still have time to pursue a legislative solution and that's what we're going to be doing.â€
Allegheny County Chief Executive Jim Roddey told the Pittsburgh Tribune Review before testifying before the subcommittee, Congress probably will address this issue sometime during the year, but it won't be done in time to help US Airways.â€
>From this observers perspective and after talking to MEC representatives and union members, the majority of the pilots may not be interested in a “defined contribution†solution and for the first time in my career, I have witnessed a sentiment shift because the majority of pilots at the hearing are saying “no more†and that there must be a legislative order to change the PBGC’s position.
Chip
The hearing had two panels of witnesses. The first panel consisted of Steve Kandarin, PBGC Exeuctive Director and Jim Keightley, PBGC General Counsel. The second panel consisted of Jim Roddey, Allegheny County Chief Execuitve, Dave Siegel, US Airways CEO, Captain Duane Woerth, ALPA President, and Captain Bill Pollock, US Airways MEC Chairman.
The hearing began with a short opening statement from Specter followed by prepared marks from Kandarin. Specter and Santorum then grilled the two PBGC representatives for about an hour disputing everything the PBGC representatives presented.
Kandarin and Keightley’s contention is if US Airways restoration plan is approved that it may set a precedent that could sometime in the future be used by other companies to hurt the defined benefit pension plans of 44 million other people covered by similar retirement plans. However, when pressed by Specter, these two men could not provide any scenario(s) as to how that could happen.
Specter then strongly pressed the PBGC representatives as to whether there are provisions under the statutes that govern the PBGC that would keep them from allowing US Airways to restructure the pilot pension plan and they reluctantly agreed that there wasn’t. Therefore, these two men have unilaterally decided (although it’s likely there has been Bush Administration input led by Secretary of Treasury Snow) to not to allow US Airways to proceed with its restoration funding plan because they didn't feel there was language in the statutes that would allow this option to proceed.
Specter asked Kandarin if the pilot pension fund was distressed terminated what would be the obligation to the PBGC and taxpayers and he responded “$500 million and if all US Airways pensions were terminated $2 billion.†Specter asked the PBGC representatives, “wouldn't it make more sense to everyone if US Airways were allowed to restructure their plans so as to not default on it?†Interestingly, Kandarin and Keightley could not provide an honest and straight-forward answer to the question.
Next Specter asked the PBGC representatives if congress had ever given the PBGC bailout money because the federal employee pension funds were underfunded. Reluctantly Keightley and Kandarin agreed that in 1974 congress authorized a federal bailout of federal government pension funds, that cover both Kandarin and Keightley’s pensions, however, the federal government never touched the line of credit because market conditions improved.
Does this seem like a double standard?
Specter then called the former PBGC General Counsel to testify, who interestingly is the same individual that wrote the PBGC Statues and he testified that “the statues were intentionally left vagueâ€. He said the statutes were written to provide leeway for the PBGC to extend consideration in case of unusual cir***stances such as what US Airways has encountered after September 11 and the great strides that have been taken at the company to restructure. He said the PBGC was wrong to stop the company’s pension restoration efforts and should allow the plan to be restructured.
>From this observer’s perch, I find it interesting that the man who wrote the statute agrees with the pilot retirement restoration plan funding agreement.
The two bureaucrats disagreed and the Specter said what we have here is “bureaucratic intringence†and the Senator was notably upset with the PBGC’s position.
At this point it was obvious to those in attendance that these two PBGC officials currently had the power and authority to approve US Airways restoration funding request when Kandarin said there is “no (statute) language we cannot do this.†However, it was readily apparent the PBGC is not going to change their mind and the only way the pilot pension can be saved is through legislative action.
At this point the next panel of speakers where called to the witness table where Roddey was first to speak and he provided prepared remarks on the importance of US Airways to Pennsylvania and the East Coast.
Roddey was followed by Siegel who said the pilot pension plan, as it now stands, would not allow the company to successfully emerge from bankruptcy. Siegel said that it was the pilot’s portion of the plan that was in jeopardy and the “rest of the employee plans were O.K.†He then stated that the Alabama Retirement Fund and US Airways agreements with Credit Card Companies have forced the airline to have a very tight time line to emerge from bankruptcy. Siegel continued that since the PBGC had not granted the restructuring of pilot’s retirement, then they had no choice but to terminate the plan to emerge from bankruptcy. Siegel said he would attempt to negotiate a new plan with ALPA.
PBGC guidelines require 60 days notice of an employer’s intention to terminate a plan; therefore, if US Airways intends to emerge from bankruptcy by March 31, the company would have to terminate the pilot retirement plan by January 30, but this would violate the pilots contract.
The next two witnesses were Woerth and Pollock who gave excellent speeches on the company and industry problems and Woerth said the “pilots were very pragmaticâ€. The US Airways pilots have provided $566 million in annual savings and have agreed to two pension cuts. The first cut came during the restructuring agreement where their pay cuts up to 37 percent would lower final average earnings (FAE) and retirement pay outs and the second cut was in the modified restructuring agreement. This cut reduced the defined benefit multiplier by 1.8 percent and capped the pay out at 50 percent of FAE. This reduction provided US Airways with another $77 million per year in savings for a total of $643 million per year, which represents the single largest union concession in the history of the airline industry.
Following the prepared statements Specter then asked Siegel what could happen to the pilots retirement plan and in most observers view Siegel “torpedoed†the legislative movement to save the pilots pension. Siegel said he advised ALPA that the pilots pension plan might have to be terminated and replaced with a defined contribution plan. Specter then asked Siegel what would the pay out be and Siegel said it would be lower than the second retirement cut. Specter seemed to be caught off guard by Siegel’s remarks, but after the meeting ALPA made it clearly known to both Santorum and Specter that either by accident or more likely by design Siegel pulled the “rug out from the argumentâ€.
Why? It is in the company’s best interest to have the pilot’s pension plan “distressed terminated†because the company would not have to pay $300 million per year for the next seven years plus $1 billion per year for the next 30 years to properly fund the plan. However, many people believe this argument is flawed because US Airways pension shortfall is due to five issues: September 11, the government imposed closure of Washington National Airport, interest rates at 41 year lows, the strongest and most sustained stock bear market, and the sluggish economy. These issues are either one time or cyclical events that will likely cure them self and permit the fund to be adequately funded in the future, maybe without any future US Airways funding action. In fact, in 2001, just two years ago the pilots pension was over funded at 104 percent and the company has made every required contribution in the history of the fund.
At the conclusion of the hearing Specter said he and Santorum would continue their work for a legislative solution to the problem and there would be another hearing on January 16, and presumably he would introduce legislation to force the PBGC to accept US Airways retirement fund restoration plan.
In an interview with reporters following the hearing Siegel said, “We don't have a lot of time, probably a couple of weeks. Either way, there will be a solution to the problem that allows us to successfully emerge†from bankruptcy. However, “Any protracted legislative process will simply be too late to accommodate the very tight timeline of our emergence plan. The time that we have to resolve this is very short. The airline’s equity sponsor and other lenders expect a resolution to this matter within days, not weeks or months.
Meanwhile, following the hearing US Airways ALPA spokesman Roy Freundlich disputed Siegel’s comments when he told reporters, “The company has the habit of accelerating timelines to the point that labor-friendly solutions cannot be reached. We have enough time to pursue a legislative solution and we’re going to continue on that track. We're not interested in a company solution that guts our pension plan. The hearing on Thursday (bankruptcy hearing for the court to approve the disclosure statement to permit US Airways to merger from bankruptcy by March 31) is not on the reorganization plan itself. We still have time to pursue a legislative solution and that's what we're going to be doing.â€
Allegheny County Chief Executive Jim Roddey told the Pittsburgh Tribune Review before testifying before the subcommittee, Congress probably will address this issue sometime during the year, but it won't be done in time to help US Airways.â€
>From this observers perspective and after talking to MEC representatives and union members, the majority of the pilots may not be interested in a “defined contribution†solution and for the first time in my career, I have witnessed a sentiment shift because the majority of pilots at the hearing are saying “no more†and that there must be a legislative order to change the PBGC’s position.
Chip