Things Are About To Get Ugly

[767jetz]

I just don't understand the logic behind the idea that those with the biggest pensions automaitically should be the ones to sacrifice their pensions.

The company couldn't care less how much an employee cashes out of his/her pension. What matters is how much the company has to contribute TO the plan. The plan with the most underfunding becomes the company's most likely target if cuts need to be made. (Which I still don't believe will automatically happen. So people should chill out until a move is actually made against a pension plan. You're stressing over something that may not happen.)

In the pilot's case, Contract 2003 made large adjustments to the pension plan lowering the outpay and shoring up the pension fund significantly. Therefore, UA currently needs to contibute the least amount to that plan making it the least likely target.

Additionally, in the event of a distressed termination of one or more pension plans(which I don't think it will come to) the guaranteed portion of the plan by the PBGC would be significant for the smaller pensions. The company could then create additional retirement benefits in the form of a B plan to compensate the employee for the difference between the PBGC's guaranteed portion and the original expected outpay.

What ever happens, there are several options that would still protect the employee's retirement. This is not a time to panic and speculate on all the possibilities. I strongly recommend UA employees to stay informed through your unions and try to ignore the largely inaccurate rumor mill created by the media and people on the outside looking in.

 

[local 12 proud]

spoken like a true "I GOT MINE" screw the rest pilot!

 

[peasant]

About PBGC. They don't pick up all the unfunded tab - just enough to hit the guarantees (28k at 60, 44 k at 65) SO with USAirways pilot pension, the pension was under 2.5 billion, the PBGC kicked in 600m (so about 25%)

Of course, to cover this, they will have to raise insurance premiums on other companys' DB plans, making it more likely that companies go to DC plans, reducing pool of DB plans, meaning premiums will have to rise further on those that are left... So all in all, not many years left on these things.

Premiums at the moment.
$19 per worker or retiree plus $9 for each $1,000 of unfunded vested benefits in single employer plans.

So UA is having to pay about 40m USD in insurance premiums to PBGC already (assuming 4.5 bn or so underfunded)

 

[Fly]

What matters is how much the company has to contribute TO the plan. The plan with the most underfunding becomes the company's most likely target if cuts need to be made.

The most underfunded pensions aren't something ANY employee group has control over. To slash one employee group over another (especially when the employee group is the most abused and treated like garbage group) is wrong.

Remember: They are in the process of firing some flight attendants because one walked off with a half bottle of water and the other with a cookie (while the 2 pilots stood watching and swigging from their bottles of water, also taken from the plane) The problem: Pitting employee groups against each other.

 

[767jetz]

The problem: Pitting employee groups against each other.

I agree with this. We should not be pitting one group against the next.

All I'm saying is that each DB plan is separate. One can be better funded simply because it is managed better and has had better returns from the market. This is not under our control. However, one could also be better funded due to concessions made to the plan in 2003. This is under the union's control. The pilot's took a big hit by reducing the multiplier as well as the pay cuts that affect the payout of a DB plan.

Again, I don't want to see anyone's retirement disappear. This is not about "I got mine" as someone else tried to say. I'm just trying to point out that IF (very big if) UA decides it needs to terminate a DB plan, and IF they want to minimize the impact on the employees, then the target may be one or two of the smaller plans, simply based on the fact that #1 it might save the company more money, and #2 it would be less expensive to set up a DC plan to compensate those employees for what they lost in the DB plan.

Notice I didn't say screw the other groups, I'm suggesting compensating them to make up for any loss of money from the part of the BD plan not covered by the PBGC.

Example 1: employee expects $40K/year from pension. After a distressed termination the PBGC pays the employee $25K/year. UA sets up a DC plan so the employee has an additional payout to make up most of the difference. End result: employee still receives close to $40K/year.

Example 2: employee expects $90K/year from pension. PBGC pays max of $30K/year after termination. UA sets up DC plan that pays employee some additional benefit. End result: employee still loses about $40-50K/year.

Which scenario sounds more fair to you?

 

[mrfish3726]

Yes, everyone shouldn't be surprised that the noose tightening is not far off. When UAL searches for outside investment, they will DEMAND that things don't go on business as usual anymore at UAL. It took Continental two bankruptcy filings to finally weed out the good boy management style that prevailed there for years. Now it will be UAL's turn to HOPEFULLY, and FINALLY get rid of the people that drug that once great company through the dirt.

Even as a former UAL mechanic the best thing that ever happened to me was to wake up and realize that UAL was one of the worst companies ANYONE could work for. I wish all the employees (not the management) the very best and feel their heartache through the ruff times. It's just to bad that the ones left have had to do this twice during their UAL career, and to many careers have already been destroyed by UAL management. But, alas do they care? Not at all, they are all still in place and will reap all the rewards in the end.

 

[46Driver]

This isn't going to help anybody's yields - Southwest is really playing hardball by reducing fares by up to 65%.
http://www.usatoday.com/travel/news/2004-0...-sw-fares_x.htm

 

[Borescope]

Jetz,

Are you really "The Chipster" in hiding???? You posts on pensions sound much the same.

 

[767jetz]

Jetz,

Are you really "The Chipster" in hiding???? You posts on pensions sound much the same.

OUCH! That hurts! 😛

Hey, I never said anyone should take it in the shorts to save my butt.

In fact I want to see a solution that preserves everyone's retirement expectations as best as possible. Whether it comes from UA or the PBGC. Re-read my posts more closely (without the filters on please). B)

Anyway, I'm still not convinced that the pensions are going away, so why doesn't everyone just chill. At least until someone actually asks for concessions.

 

[46Driver]

Just when Southwest hits everybody with low fares, Jet Blue answers. So much for yields...
http://biz.yahoo.com/pz/040713/60688.html

 

[Segue]

Its really amazing how fares have collapsed - I recently bought a non-refundable 3 day in fare in a key business market for $500 - I remember years back there was no way I could ever get that same itinerary for under $1,500.

 

[WorldTraveler]

767Jetz,
Thankfully, the pilot plan is in better shape and there are compelling reasons why UAL might terminate the other three before the pilot plan. Unfortunately, UA history is littered w/ decisions that pit one employee group against the other; the outcome has been very plain for anyone to see.
Your terminate-reconstitute another plan scenario doesn't reduce the TOTAL benefit liabilities that UA will incur; without reducing the total amount of benefit compensation, all you're doing is rearranging the deck chairs on the Titanic. Yes, the PBGC may take some of the liability for some of the plans but that amount above the PBGC max has to be covered by UAL one way or the other or it has to be written off. The type of plan it is offered in doesn't really matter; an employee either knows they are getting it all from somewhere or they have to cough up a much bigger part of their retirement on their own. UAL can shift some of the costs to the government but there will be a gap between what the gov't will pick up and what either UAL or the employee must pay; the slugfest will be over the latter category.

 

[WorldTraveler]

Don't doubt for a minute that the LCCs aren't trying very hard to knock off a couple network carriers; they have lots of planes on order they need to put someplace and airlines like United and USAirways still fly to some very popular places. Just look at how many other discount stores exist in the era of Wal-Mart.

 

[767jetz]

without reducing the total amount of benefit compensation, all you're doing is rearranging the deck chairs on the Titanic.

I don't agree with that 100%. Yes it would be rearranging financial commitments, but it would also reduce UA's expense significantly.

Remember, in the hypothetical situation of a ditressed termination of one of the lesser pension plans, the benefit the employee was expecting would fall below the limit paid by the PBGC. Therefore MOST of the payout would come from the PBGC, leaving a very small amount to be made up by UA if they chose to do so.

Additionally, it is not the total benefit compensation that is a problem for UA. It is the accelerated contributions UA is required to make by law when the fund is significantly underfunded.

I agree that often one work group is pitted against the next in this industry. While pensions are a sensitive subject, I don't believe it has to be a devisive one in this case.

 

[ohcaptainron]

Delta Air to Take a Big Charge

By Eric Gillin
TheStreet.com Staff Reporter
7/13/2004 12:22 PM EDT
Click here for more stories by Eric Gillin

Updated from 8:21 a.m. EDT

Less than a week before it reports second-quarter earnings, Delta Air Lines (DAL:NYSE - news - research) shares fell 6.1% Tuesday after the company said it will take a $1.65 billion non-cash for the reporting period.

The beleaguered carrier, which needs to wheedle wage concessions from pilots in order to stave off a bankruptcy protection filing, said the bulk of the charges, $1.53 billion, is related to deferred income taxes. Essentially, the company has stopped recognizing income tax benefits going forward, with Delta saying it does not know when it will be able to generate sufficient taxable income to use its deferred income tax assets.

As Delta struggles, employees are leaving the company. The remaining $117 million in charges covers a settlement related to the company's defined benefit pension plan for pilots because of higher-than-average retirements. The company, which releases earnings this coming Monday, stressed that the charges will not affect its June 30, 2004, cash position.

In reaction, shares of the carrier fell 41 cents to $6.34.

The situation at Delta is growing so dire that Citigroup Smith Barney analyst Daniel McKenzie cut his price target on the carrier to $1 on Monday night, citing the government's decision to deny United Airlines, unit of UAL (UALAQ.OB:OTC:BB - news - research), a loan guarantee.

"We think the risk of Delta filing for Chapter 11 have substantially increased, particularly with fuel continuing to hover near peak levels," wrote McKenzie, in a research note. "Despite encouraging news from the Delta pilots union on concessions, we think labor uncertainty increases for Delta following the UAL loan guarantee denial." (Citigroup Smith Barney does and seeks to do business with the companies covered in its research reports.)

Furthermore, McKenzie warned current Delta shareholders that they may not see the kind of appreciation enjoyed by AMR (AMR:NYSE - news - research), parent of American Airlines, whose shares skyrocketed after employees agreed to wage cuts just over a year ago. In his view, Delta's hub markets face too much low-cost competition from AirTran (AAI:NYSE - news - research) and JetBlue (JBLU:Nasdaq - news - research) and the company's underfunded pension plan will divert cash it could use to repair a debt-laden balance sheet.