Monday January 13, 9:58 AM EST
NEW YORK, Jan 13, 2003 (BUSINESS WIRE) -- The US airline industry is likely to assume a new and prominent place as the industry is at risk for financial fallout resulting from the growing magnitude of its pension funding problem. In a new report to be released this morning, Fitch Ratings estimates that the aggregate level of pension plan underfunding in the industry will exceed $18 billion as of Dec. 31, 2002.
'Increased pension funding burdens will ultimately affect the credit quality of major network carriers currently operating outside of bankruptcy, and will complicate the task of reorganization under Chapter 11 for both US Airways and United,' said analyst William Warlick. 'These growing obligations will inevitably lead to large increases in required cash contributions to pension plans, compounding the financial stress and cash flow concerns that already exist in the industry.'
However, this is a situation that is affecting only the major US network carriers. 'The absence of defined benefit plans among the low-cost carriers, such as Southwest, AirTran, ATA, JetBlue and Frontier, represents yet another source of competitive advantage for these airlines in relation to their high-cost network carrier rivals,' Warlick added.
According to Fitch estimates, Delta has the largest underfunded pension obligation at $4.4BN and United follows with $4.1BN. American, Northwest and US Airways each have a gap of $3.0BN or more.
Fitch will be hosting a teleconference to further address questions regarding the pension issue on Tuesday, Jan. 14, 2003 at 11:30 a.m. Information regarding the call will follow.
The Fitch Report 'Rapid Descent: Pensions in the US Airline Industry' is available on the internet at 'www.fitchratings.com'.
CONTACT: Fitch Ratings
William Warlick (Airlines), 312/368-3141
Chris Struve (Pensions), 312/368-3188
Mark Oline, (Airlines), 312/368-2073, Chicago.
Media Relations:
James Jockle, 212/908-0547, New York.
This article clearly shows we're not alone.Other airlines have the luxury of time to work through their problem.U has to confront the pension problem now as a condition to exit CH-11.