MEC CODE-A-PHONE UPDATE
January 24, 2003
This is Roy Freundlich with a US Airways MEC update for Friday, January 24.
The following update is fairly long and detailed but contains important
information that all pilots need to be aware of as your MEC prepares to
deal with the aggressive inequity being attempted by US Airways management
against our pilot group. In essence, the Company has developed a business
plan that would sacrifice our pilots pension benefits while at the same
effectively shifting 500 million dollars from the pilots pension plan to
all the other employee pension plans to maintain and preserve their
original benefits.
MEC Chairman Bill Pollock held an internal ALPA coordination meeting
yesterday and today at the ALPA offices in Herndon to address the current
threat to pilot pension benefits and coordinate MEC committee activity.
Attending the meeting were members of the Retirement and Insurance
Committee, Negotiating Committee, Communications Committee and ALPA
financial and legal advisors. The officers, committee members and advisors
at this meeting also received a confidential presentation from President
and CEO David Siegel, and other management officials and corporate
advisors, on management''s views on addressing pilot pension benefits.
Over the past nine months, since the onset of the first restructuring
negotiation in May 2002, preserving the pilots'' pension benefits has been a
top priority for your MEC. During the first restructuring negotiations, the
Company sought benefit and cost reductions for all employee pension plans
to reduce US Airways'' PBGC funding requirements in order to meet ATSB
conditions for a loan guarantee. Pension plan costs were reduced for
pilots, flight attendants, mechanics and management employees primarily as
a result of wage reductions, which reduced final average earnings
calculations and thereby reduced pension benefits, liabilities and the
underfunding contributions required by US Airways.
With these wage reductions, the June 2002 ATSB business plan total
contribution for the pilots'' pension plan for seven years, 2003 through
2009, was about 1.66 billion dollars (down from 2.31 billion dollars prior
to the concessions). The total for all other employee pension plan
contributions combined was reduced to about 860 million dollars. The total
for all other employee pension plans contributions in the June 2002 ATSB
business plan was about 2.52 billion dollars (1.66 billion plus 860 million
dollars). After all employee groups ratified the first restructuring
agreements in August through October 2002, the Company committed to meeting
this total funding obligation of about 2.52 billion dollars, preserving all
employee pension plans.
In November 2002, after the Company announced that revenue forecasts from
the June ATSB business plan were not being realized, management revised its
revenue forecast downward and came back to employees, under the threat of
imminent bankruptcy liquidation, for another round of concessions. In
addition to the revenue forecast, the Company had data that indicated lower
asset values of the pension plans and modified assumptions for underfunding
contributions. The underfunding cost was revised significantly upward as a
result of the impact that market conditions and lowered interest rates had
on the pension plans.
During the second restructuring negotiations, retirement benefit reductions
were included in the pilots'' December 13 supplemental cost reduction
agreement to help preserve the pilots'' pension plan. This included
reducing the maximum benefit multiplier from 65 percent to 50 percent and
the yearly multiplier from 2.4 percent to 1.8 percent over the first 25
years of benefit accrual. This, in turn, produced pension cost reductions
and saved the Company approximately 77 million dollars average per year for
seven years, or 500 million dollars for the seven-year period. The pilot
concessions to the retirement benefits nullified the impact that lower
market performance and interest rates had on the pilots'' pension plan. As a
result, despite the reduced market value of assets and the reduced interest
rate assumptions, the pilot pension plan contribution costs for US Airways
only slightly increased by about 38 million dollars over the seven-year
period to about 1.69 billion dollars (up from about 1.66 billion dollars
calculated in the summer of 2002).
However, the other employee pension plans'' combined contribution costs
increased by about 582 million dollars to about 1.44 billion dollars (up
from about 860 million dollars) due to the market and interest rate
changes. This cost increased because no other employee group agreed to
benefit reductions to preserve their pension plans. The effect was that
the 500 million dollar pilot cost reduction agreed to by ALPA was absorbed
by the increased cost of the other employees'' pension plans, which to date
suffer no benefit decrease. The total for all employee pension plan
contributions in the second, January 2003, ATSB business plan was about
3.14 billion dollars (1.697 billion + 1.44 billion). This cost was up from
the previous business plan''s 2.52 billion dollars primarily because of
the
increased cost of the other employee pension plans, not the pilots.
Even after round two, with ALPA''s reduced pension benefits, management took
the position that the Company could not meet the increased funding
obligation for all employee pension plans and still meet ATSB conditions
for a loan guarantee. In an effort to preserve all employee pension plans,
the Company petitioned the PBGC for a deferred payment schedule by
requesting the seven-year funding contribution for the pilots'' plan be
spread out over 30 years. This request reduced the Company''s seven-year
underfunding requirement for only the pilots'' pension plan from 1.69
billion dollars to about 852 million dollars, again making up for the
increased cost of the other employee pension plans, which the Company
included in its January 2003 ATSB business plan. The Company added the
increased pension contribution of 1.44 billion dollars of the other
employee pension plans in the January 2003 ATSB business plan, and promised
other employees their pensions were secure as a result of their
concessions.
After the PBGC rejected US Airways'' restoration-funding plan, ALPA jointly
pursued a legislative solution with the Company to require the PBGC to
accept the restoration funding plan solution that preserved all pension
plans. On December 13, prior to ratifying the Supplemental Cost Reductions
agreement, the MEC required that a confidential side letter be executed by
the Company that legally obligated it to provide funding for pension
benefits to pilots in the event the pilot pension plan was terminated by
the PBGC. This agreement was confidential because if publicly revealed
during our pursuit of a legislative solution, it would have interfered with
this effort. However, at the first Senate hearing on this issue, President
and CEO David Siegel revealed that a company alternative pension plan that
replicated the economics of provisions in the second pilot restructuring
agreement was being developed by the Company. Mr. Siegel further ignored
the confidentiality provision of this side letter in subsequent email
messages to individual pilots.
Despite recent legislative setbacks, the legislative solution is still
active in the Senate Finance Committee and is being vigorously pursued by
ALPA.
Given the Company''s position and proposed solutions to date, the
termination of the pilots'' pension plan will cause our pilots to lose
substantial accrued benefits that the pilots have already earned, which
will be inequitable to all US Airways pilots. We do not believe that
alternatives being pursued by the Company at this time would prevent pilots
from losing a substantial part of the benefits that they have earned.
Please understand clearly that ALPA has in no way agreed to the termination
of the pension plan, and we are actively reviewing many alternatives in
order to preserve our pilots'' benefits.
US Airways pilots have provided significantly more concessions that any
other employee group-in fact more than all combined-to help this company
survive and emerge from bankruptcy. We are now being rewarded by solely
facing the termination of our defined benefit retirement plan, while the
cost reductions for our pension plan are in effect shifted to preserve the
full benefits of all other employee groups'' pension plans at increased
funding costs.
At this point your MEC members, officers, and key committees are
coordinating activity in our effort to protect the benefits that US Airways
pilots have already earned and paid for time and time again.
MEC Chairman Bill Pollock has called a special MEC meeting for Tuesday,
January 28 and Wednesday, January 29, at the ALPA Offices in Herndon for
the purpose of giving the MEC a briefing on the status of the pilots''
pension plan.
Your MEC representatives clearly recognize the magnitude of unfairness the
pension issue presents to our pilots. It is imperative from this time
forward that all pilots stay informed.
As this issue progresses please do not allow it to affect in any way your
duties as flight crewmembers or the operation of the airline. It is
imperative to our success that our airline''s operations remain reliable and
stable. Any job actions are illegal and expose all of us to significant
liabilities and to the failure of our efforts to preserve our jobs and our
pensions. This is of the utmost importance and must be taken seriously and
sincerely by all crewmembers. Please continue to participate in our
legislative affairs program that is available on the pilots only section of
the US Airways MEC website.
Please remember we have 1,748 pilots on furlough, with 79 pilot furloughs
scheduled for February 4.
Thank you for listening.
January 24, 2003
This is Roy Freundlich with a US Airways MEC update for Friday, January 24.
The following update is fairly long and detailed but contains important
information that all pilots need to be aware of as your MEC prepares to
deal with the aggressive inequity being attempted by US Airways management
against our pilot group. In essence, the Company has developed a business
plan that would sacrifice our pilots pension benefits while at the same
effectively shifting 500 million dollars from the pilots pension plan to
all the other employee pension plans to maintain and preserve their
original benefits.
MEC Chairman Bill Pollock held an internal ALPA coordination meeting
yesterday and today at the ALPA offices in Herndon to address the current
threat to pilot pension benefits and coordinate MEC committee activity.
Attending the meeting were members of the Retirement and Insurance
Committee, Negotiating Committee, Communications Committee and ALPA
financial and legal advisors. The officers, committee members and advisors
at this meeting also received a confidential presentation from President
and CEO David Siegel, and other management officials and corporate
advisors, on management''s views on addressing pilot pension benefits.
Over the past nine months, since the onset of the first restructuring
negotiation in May 2002, preserving the pilots'' pension benefits has been a
top priority for your MEC. During the first restructuring negotiations, the
Company sought benefit and cost reductions for all employee pension plans
to reduce US Airways'' PBGC funding requirements in order to meet ATSB
conditions for a loan guarantee. Pension plan costs were reduced for
pilots, flight attendants, mechanics and management employees primarily as
a result of wage reductions, which reduced final average earnings
calculations and thereby reduced pension benefits, liabilities and the
underfunding contributions required by US Airways.
With these wage reductions, the June 2002 ATSB business plan total
contribution for the pilots'' pension plan for seven years, 2003 through
2009, was about 1.66 billion dollars (down from 2.31 billion dollars prior
to the concessions). The total for all other employee pension plan
contributions combined was reduced to about 860 million dollars. The total
for all other employee pension plans contributions in the June 2002 ATSB
business plan was about 2.52 billion dollars (1.66 billion plus 860 million
dollars). After all employee groups ratified the first restructuring
agreements in August through October 2002, the Company committed to meeting
this total funding obligation of about 2.52 billion dollars, preserving all
employee pension plans.
In November 2002, after the Company announced that revenue forecasts from
the June ATSB business plan were not being realized, management revised its
revenue forecast downward and came back to employees, under the threat of
imminent bankruptcy liquidation, for another round of concessions. In
addition to the revenue forecast, the Company had data that indicated lower
asset values of the pension plans and modified assumptions for underfunding
contributions. The underfunding cost was revised significantly upward as a
result of the impact that market conditions and lowered interest rates had
on the pension plans.
During the second restructuring negotiations, retirement benefit reductions
were included in the pilots'' December 13 supplemental cost reduction
agreement to help preserve the pilots'' pension plan. This included
reducing the maximum benefit multiplier from 65 percent to 50 percent and
the yearly multiplier from 2.4 percent to 1.8 percent over the first 25
years of benefit accrual. This, in turn, produced pension cost reductions
and saved the Company approximately 77 million dollars average per year for
seven years, or 500 million dollars for the seven-year period. The pilot
concessions to the retirement benefits nullified the impact that lower
market performance and interest rates had on the pilots'' pension plan. As a
result, despite the reduced market value of assets and the reduced interest
rate assumptions, the pilot pension plan contribution costs for US Airways
only slightly increased by about 38 million dollars over the seven-year
period to about 1.69 billion dollars (up from about 1.66 billion dollars
calculated in the summer of 2002).
However, the other employee pension plans'' combined contribution costs
increased by about 582 million dollars to about 1.44 billion dollars (up
from about 860 million dollars) due to the market and interest rate
changes. This cost increased because no other employee group agreed to
benefit reductions to preserve their pension plans. The effect was that
the 500 million dollar pilot cost reduction agreed to by ALPA was absorbed
by the increased cost of the other employees'' pension plans, which to date
suffer no benefit decrease. The total for all employee pension plan
contributions in the second, January 2003, ATSB business plan was about
3.14 billion dollars (1.697 billion + 1.44 billion). This cost was up from
the previous business plan''s 2.52 billion dollars primarily because of
the
increased cost of the other employee pension plans, not the pilots.
Even after round two, with ALPA''s reduced pension benefits, management took
the position that the Company could not meet the increased funding
obligation for all employee pension plans and still meet ATSB conditions
for a loan guarantee. In an effort to preserve all employee pension plans,
the Company petitioned the PBGC for a deferred payment schedule by
requesting the seven-year funding contribution for the pilots'' plan be
spread out over 30 years. This request reduced the Company''s seven-year
underfunding requirement for only the pilots'' pension plan from 1.69
billion dollars to about 852 million dollars, again making up for the
increased cost of the other employee pension plans, which the Company
included in its January 2003 ATSB business plan. The Company added the
increased pension contribution of 1.44 billion dollars of the other
employee pension plans in the January 2003 ATSB business plan, and promised
other employees their pensions were secure as a result of their
concessions.
After the PBGC rejected US Airways'' restoration-funding plan, ALPA jointly
pursued a legislative solution with the Company to require the PBGC to
accept the restoration funding plan solution that preserved all pension
plans. On December 13, prior to ratifying the Supplemental Cost Reductions
agreement, the MEC required that a confidential side letter be executed by
the Company that legally obligated it to provide funding for pension
benefits to pilots in the event the pilot pension plan was terminated by
the PBGC. This agreement was confidential because if publicly revealed
during our pursuit of a legislative solution, it would have interfered with
this effort. However, at the first Senate hearing on this issue, President
and CEO David Siegel revealed that a company alternative pension plan that
replicated the economics of provisions in the second pilot restructuring
agreement was being developed by the Company. Mr. Siegel further ignored
the confidentiality provision of this side letter in subsequent email
messages to individual pilots.
Despite recent legislative setbacks, the legislative solution is still
active in the Senate Finance Committee and is being vigorously pursued by
ALPA.
Given the Company''s position and proposed solutions to date, the
termination of the pilots'' pension plan will cause our pilots to lose
substantial accrued benefits that the pilots have already earned, which
will be inequitable to all US Airways pilots. We do not believe that
alternatives being pursued by the Company at this time would prevent pilots
from losing a substantial part of the benefits that they have earned.
Please understand clearly that ALPA has in no way agreed to the termination
of the pension plan, and we are actively reviewing many alternatives in
order to preserve our pilots'' benefits.
US Airways pilots have provided significantly more concessions that any
other employee group-in fact more than all combined-to help this company
survive and emerge from bankruptcy. We are now being rewarded by solely
facing the termination of our defined benefit retirement plan, while the
cost reductions for our pension plan are in effect shifted to preserve the
full benefits of all other employee groups'' pension plans at increased
funding costs.
At this point your MEC members, officers, and key committees are
coordinating activity in our effort to protect the benefits that US Airways
pilots have already earned and paid for time and time again.
MEC Chairman Bill Pollock has called a special MEC meeting for Tuesday,
January 28 and Wednesday, January 29, at the ALPA Offices in Herndon for
the purpose of giving the MEC a briefing on the status of the pilots''
pension plan.
Your MEC representatives clearly recognize the magnitude of unfairness the
pension issue presents to our pilots. It is imperative from this time
forward that all pilots stay informed.
As this issue progresses please do not allow it to affect in any way your
duties as flight crewmembers or the operation of the airline. It is
imperative to our success that our airline''s operations remain reliable and
stable. Any job actions are illegal and expose all of us to significant
liabilities and to the failure of our efforts to preserve our jobs and our
pensions. This is of the utmost importance and must be taken seriously and
sincerely by all crewmembers. Please continue to participate in our
legislative affairs program that is available on the pilots only section of
the US Airways MEC website.
Please remember we have 1,748 pilots on furlough, with 79 pilot furloughs
scheduled for February 4.
Thank you for listening.