PBGC Rejects US Airways Pension Plans

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chipmunn

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Pension snub rocks US Airways
Pittsburgh (Tribune Review) - US Airways'' request to slash its pension-funding obligations by $1.1 billion has been rejected by the federal government — a defeat that could cripple the struggling airline''s effort to climb out of bankruptcy, the Pittsburgh Tribune-Review learned.
The rejection came as Pittsburgh''s dominant carrier planned to submit its reorganization plan to a bankruptcy court in Alexandria, Va., late Friday night. Details of that plan were not yet available, however.
The carrier''s reorganization plan was expected to detail a strategy for hubs, routes, aircraft fleet, finances and a new regional-jet division called MidAtlantic Airways, based in Pittsburgh.
Meanwhile, negotiators for US Airways aircraft mechanics, bag handlers and flight attendants last night reached tentative contracts that would save a combined $60 million a year through changes to benefits and work rules.
The International Association of Mechanics said its tentative accord covering some 6,200 mechanics would cut costs by $45 million a year. The union''s pact covering about 4,900 baggage handlers would save some $14 million. Each work group will cast ratification votes in early January.
Any time you can get an agreement from your mechanics, that''s a very good thing, said Darryl Jenkins, director of the Aviation Institute at George Washington University, Washington, D.C. They are the toughest to deal with.
The new concessions come on top of the $160 million in annual wages and benefits already given back this fall by airline mechanics, and the $67 million a year given back by baggage handlers.
Last month, management began seeking an additional $200 million a year from its labor unions. Combined with US Airways pilots'' agreement on Dec. 11 to concede $100 million, the carrier has shaved more than $175 million toward that $200 million goal.
Also last night, the Association of Flight Attendants said it reached a tentative contract agreement with the airline. Neither the union nor the airline disclosed how much would be saved. Management had sought $26 million a year from the attendants union.
The agreements reached last night are in addition to givebacks US Airways labor groups agreed to in the fall that totaled nearly $900 million a year in wages, benefits and work-rule changes.
Despite the new labor agreements, the Pension Benefit Guaranty Corp.''s rejection of US Airways'' request to slash its pension-funding obligations by $1.1 billion is a serious blow, an analyst said.
Cash-strapped US Airways had sought permission to change its defined-benefit, retirement plan so that the airline could set aside only $2 billion from 2003 through 2009, instead of the current $3.1 billion.
But a spokesman for the Pension Benefit Guaranty Corp., which backs and oversees pension funds, told the Pittsburgh Tribune-Review yesterday that the airline''s request was beyond the bounds of what we can do.
US Airways asked us to terminate the plan and to restore it at a lower funding level, said Jeffrey Speicher, a spokesman for the government agency in Washington, D.C. (But) PBGC can''t do what the airline is suggesting.
Earlier this week, U.S. Sen. Arlen Specter, a Republican from Philadelphia, wrote the agency strongly urging it to approve US Airways'' proposal. Otherwise, the employer of about 17,000 Pennsylvanians could be forced into liquidation, Specter warned.
A billion dollars is a lot of money, said analyst Jenkins. I don''t know how this affects their overall reorganization plan, but this cannot be good news.
US Airways had no comment on the pension panel''s decision.
The Arlington, Va.-based carrier has until Jan. 31 to file its reorganization plan with the court. But management has stuck with its Dec. 20 target, in hopes of emerging from bankruptcy by March and receiving $440 million more from its backer in bankruptcy, the Retirement Systems of Alabama.
A bankruptcy judge in Alexandria, Va., will weigh the merits of US Airways'' reorganization plan and hold a hearing on it Jan. 16.
At the same time, the Air Transportation Stabilization Board, created after the Sept. 11, 2001, terrorist attacks to support battered airlines, will use the document to decide whether US Airways would be financially fit to repay a $900 million loan.
Approvals from both the government board and the bankruptcy court are critical to the airline''s chances.
US Airways employs roughly 9,100 in Pittsburgh out of about 33,000 overall. That compares with 11,600 and 45,000, respectively, before Sept. 11.
Yesterday many workers, however, were nervous their jobs could be a casualty of the reorganization.
I''d complete my 20th year with US Airways next June, but I probably won''t make it past January, said Rudy Nance, a ticket agent from Chippewa, Beaver County.
The company has threatened the unions, saying everyone needs to be on board with concessions, or they would shut the airline down by Christmas, said Nance, 56. I''d just as soon let them close it. I''ll go out and find another job. They''re out there.
 
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chipmunn

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Forktime:

There was no club and rumors began surfacing last week the PBGC would take this action. It's unclear at this time what this means, but more details could be released in the morning when the POR is announced.

The unions have known about this issue for a couple of weeks and that is why ALPA had a deadline to ratify their agreement by the MEC last Friday.

It appears the pension plans may not have been terminated and there may be an option to freeze the defined benefits and transition to a cash contribution or defined contribution plan, per President Bush's desires.

This was done at IBM a few years ago and is not uncommon at major corporations; however, I'm not sure if this can occur at US Airways.

I have been told by union sources the PBGC announcement was a political action driven by Secretary's Chao, Evans, and O'Neil.

Chip
 

delldude

Veteran
Oct 29, 2002
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[P]
[BLOCKQUOTE][BR]----------------[BR]On 12/21/2002 12:52:28 AM chipmunn wrote:
[P]Forktime:[BR][BR]There was no club and rumors began surfacing last week the PBGC would take this action. It's unclear at this time what this means, but more details could be released in the morning when the POR is announced.[BR][BR]The unions have known about this issue for a couple of weeks and that is why ALPA had a deadline to ratify their agreement by the MEC last Friday.[BR][BR]It appears the pension plans may not have been terminated and there may be an option to freeze the defined benefits and transition to a cash contribution or defined contribution plan, per President Bush's desires.[BR][BR]This was done at IBM a few years ago and is not uncommon at major corporations; however, I'm not sure if this can occur at US Airways.[BR][BR]I have been told by union sources the PBGC announcement was a political action driven by Secretary's Chao, Evans, and O'Neil.[BR][BR]Chip [/P]----------------[/BLOCKQUOTE]
[P][/P]wucking fonderful....so does bronner pull the plug monday as he intimated?my cow died,i don't need his bull anymore.
 

mlt

Senior
Dec 2, 2002
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Chip,
The change in pension plans at IBM and other corporations are called Cash Balance Pensions and they are highly discriminatory to the middle-aged worker (age 40+). In fact, there is on-going litigation against these corporations based on age discrimination. When congress commences their next session they will be addressing this very situation.

PBGC...
The pension plans at U are separate funds. Currently, the pilot's pension is the catalyst that would cause the house to fall. The IAM's underfunded portion is 15%, while AFA's is only 9%. After discussions with the other labor groups, ALPA realized the pension issue was their responsibility and that is why they were in a hurry to reach an agreement. It had nothing to do with altruism. Please believe I find no pleasure in the concessions your group has given. My only intention is to share a realistic view.
 

mlt

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Dec 2, 2002
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Chip,
Two more comments...President Bush is not involved in our labor negotiations and he never asked us to accept a different pension plan. Additionally, Paul O'Neill resigned his position and left Washington 10 days ago. According to media reports, he was not a team player and that is why he was asked to submit his resignation. So, suggesting both men are involved in our negotiations and of the same opinion is less than a fair representation. In fact, not only are these men no longer working together; Paul O'Neill has returned to the private sector and resides in Pittsburgh.
 
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chipmunn

Guest
Bear96:[BR][BR]I agree with you and I believe we were talking about two different points. You were discussing changing the plan and I was discussing a distressed termination.[BR][BR]Chip
 

mlt

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Dec 2, 2002
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Chip,
With all due respect, cash balance pensions are a hybrid of defined benefit and defined contributions and the term is not interchangeable.
 
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chipmunn

Guest
MLT:[BR][BR]Your comments are more concise and I used the three Secretary's names because Arlen Specter addressed them directly from thier positions in the Commerce, Labor, and Treasury Departments. I fully recognize President Bush is not involved in our negotiations; however, the Bush Administration, which would have been a better literary phrase was, and it's the president's cabinet that we have to contend with over the retirement issue. ALPA fully understands its role in response to the pension issue and its role in the company.[BR][BR]As far as other retirement options being discriminatory, I agree.[BR][BR]That's why people like me have taken a 39 percent pay cut or nearly a $100,000 per year loss in pay and benefits as well as the productivity changes.[BR][BR]In today's disclosure statement US Airways said, "The company must resolve a pension funding liability estimated at $3.1 billion over the next seven years. The company continues to explore options to lower its pension expense."[BR][BR]ALPA has prepared for this eventuality when it notified the members last week that a future change would require membership ratification. MLT, the pilots fully understand the scorecard. With all due respect, a Cash Balance or Cash Contribution plan is an interchangeable term and used throughout the financial community. [BR][BR]Chip[BR]
 
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chipmunn

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ALPA expected the PBGC response and I have been advised the PBGC has not taken action on the plans yet, although the initial Company/ALPA solution was rejected. Senator Spector and the Pennsylvania congressional delegation are still working this issue and it needs to be resolved one way or another.[BR][BR]Chip
 

Bear96

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Aug 20, 2002
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[blockquote]
----------------
On 12/21/2002 12:52:28 AM chipmunn wrote:


...It appears the pension plans may not have been terminated and there may be an option to freeze the defined benefits and transition to a cash contribution or defined contribution plan, per President Bush's desires.

This was done at IBM a few years ago and is not uncommon at major corporations; however, I'm not sure if this can occur at US Airways...

Chip
----------------
[/blockquote]

Chip this is the point I was trying to make a week or so about the pensions.

If your pension benefits are defined in your collective bargaining agreements, management cannot just change it without negotiating.

I susepct this is what was behind the PBGC's decision to reject U management's request to underfund the pensions. U is obligated to fund the pensions as stipulated in the CBAs until the CBA language is changed.

Same with transitioning to a cash contribution or defined contribution plan. If your CBAs call for a defined benefit plan, they will first have to change the CBAs. U cannot unlaterally implement a whole new pension program. That would violate the CBAs.
 

diogenes

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Aug 22, 2002
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I believe ALPA would be far wiser to immediately convert to a DCRP. So long as you have a DBRP, the company, and the government, in the shape of the PBGC, has far too much leverage in your life.

You guys have the resources to make a bundle on a 401k. The current set-up with Fidelity has ample investment options. Get your current deal frozen, and OUT OF U'S HANDS. Then max out on your 401k, and you'll probably come out ahead.

How do I know? That's the life I'm living.
 

Biffeman

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Nov 25, 2002
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Dio, if everyone here was so astound on wall street they would all be millionaires the markets are way down that is one of the main problems in regards to all companies and the pensions being underfunded. 401Ks are the not they way to go, ask enron and worldcom employees.