Ual Expects To Cancel Pension Plans

Mar 26, 2004
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UAL Expects to Cancel Pension Plans
Thursday August 19, 2:52 pm ET
By Meredith Grossman Dubner

CHICAGO (Reuters) - United Airlines, which has said it plans to skip nearly $500 million in pension contributions this fall, said in bankruptcy court papers it likely will have to cancel and replace all of its pension plans.
The No. 2 U.S. airline, a unit of UAL Corp. (OTC BB:UALAQ.OB - News), said in court documents filed on Wednesday it was no secret to any of its stakeholders that the company is considering whether termination and replacement of the plans will be necessary.

"As United has told its board of directors, the creditors' committee, and its labor unions, given the magnitude of the further cost reductions needed to create a viable business plan and attract exit financing, the termination and replacement of all of United's defined benefit pension plans likely will be required," the company said.

No final decisions on the pension plans have been made, the carrier said.

United, which has been operating in Chapter 11 since December 2002, has four pension plans covering various groups of employees.

The airline has said skipping a $72 million pension payment in July as well as the upcoming fall contributions will provide it with the flexibility it needs to save money and attract badly needed investors.

The International Association of Machinists, the Association of Flight Attendants and the Pension Benefit Guaranty Corp., the U.S. agency which insures corporate retirement plans, have all asked the court to prevent United from ceasing payments.

United this week agreed to the appointment of an independent monitor to represent the interests of its pension plan participants.

SOUND BUSINESS JUDGMENT

United also said in the court filing that proposed changes to its bankruptcy financing, which will provide it with an additional $500 million and extend its loan maturity until June 2005, do not expressly prohibit the carrier from making pension contributions.

Rather, the airline said the decision to halt payments was based on prudent business judgment and its need to preserve liquidity. The proposed debtor-in-possession financing merely holds United to its projections about cash available to repay the loan, it said.

A court hearing on the proposed DIP financing is set for Friday.

United also claims there is nothing in federal laws governing pensions that requires a bankrupt company to make minimum pension contributions.

The carrier said it would deal with minimum payments after exiting bankruptcy if the pension plans could be saved.

Even with the additional $500 million in DIP financing and the suspension of pension funding, United said its cash position is still precarious.

"Continued cash balances less than $1 billion are not appropriate liquidity levels for an airline of United's size," the carrier said in court papers.

US Airways Group Inc. (NasdaqNM:UAIR - News) has terminated its pilot pension plan and replaced it with a cheaper one as part of its bankruptcy reorganization. Delta Air Lines Inc. (NYSE:DAL - News), which is trying to cut costs and come up with ways to revamp its business outside of bankruptcy court, has proposed changes to its pilot pension plan but has not made specifics public. (Additional reporting by David Bailey in Chicago)
 
Is it bad news? It's certainly expected news. We'd probably be better off with some variety of 401K enhancement.
 
A 401K is not going to make up the difference here. Period. The Fed's will sue UAL for a tidy sum and if they can't collect they will at least get a judgment to collect at a later time. Good luck on us getting anything. I also want to know , where was my union when UA was not paying into the fund. My dues account for nothing now.

The 401K which we already have will just be our own. It is in our contract that the company provide a pension. I'm sure present management will go to the court system to have it thrown out. What gets me is that UA knew this all along, and another thing that gets me is employees saying, "But we'll get a 401K", like I say we already have that. Walmart Airlines (without the profits) here we come.
 
I have not been following the board as of late, but the information of the pensions is flashing even here on the financial news - the financial community is wasting no time on this one. I am sorry to hear of it for the staff although I am not sure that anyone should be surpirsed. If the reports that were posted on this board were true of Mr. Tilton promising to leave no stone unturned in the BK process then I would have thought that this unfortunate event was more of an expectation although no person would have expected the recovery to be so far in returning.
The question is now of how much this will/would save a year in outlay and will it be enough to save United? One of the figures bandied about at close to 1.5B a year in payments alone. This would serve as a great boost toward the profit side but it would remain to be seen if the firm could parley that advantage into a long term survial strategy.
Sorry to you and best of luck!
Cheers
 
By the way..... With this new format (with each new version being even harder to read than the previous), I notice that we have been assigned to a group entitled "Founder's Club." How did we garner such honour? Frankly, as your great wit Groucho Marx once said: "I would not want to be a member of any club that would accept me."
I thought being a Sophist and a Flat Earther were more than enough ;)
 
This is phenomenal news. Now we can all be just like "new" employees and "invest" in UAL....just ask Seque. I think this is great, we can be a LCC and really "sock it to 'em". Lean and mean and all that. And we can ALL be proud to be at ground zero, isn't that right my pilots, since they're talking about YOUR pension too...I feel much better about things. Yep, I got 2 more days off but I'm just iching to get back and keep'm flying. And hopefully, we'll all be just ONE BIG HAPPY FAMILY again. :up:
 
Remember, keep your chins up and stay united. I'll be talking to you again soon. What a crock of s**t. :down:
 
What, if any, are the legal remedies available to the workgroups if the labor contracts are amended by the loss of the pensions?
 
blueskies4ever said:
UAL Expects to Cancel Pension Plans
Thursday August 19, 2:52 pm ET
By Meredith Grossman Dubner

"As United has told its board of directors, the creditors' committee, and its labor unions, given the magnitude of the further cost reductions needed to create a viable business plan and attract exit financing, the termination and replacement of all of United's defined benefit pension plans likely will be required," the company said.

[post="170577"][/post]​

DO THEY EVEN KNOW WHAT A BUSINESS PLAN IS?!!!!!

It just looks like our wages & benefits are "The Business Plan"

Real pathetic. How much do those Execs make?
 
spacewaitress said:
Is it bad news? It's certainly expected news. We'd probably be better off with some variety of 401K enhancement.
[post="170610"][/post]​
spacewaitress, no disrespect intended here, but...

I am tired of people saying how much "better" a 401(k) type of plan is compared to a defined benefit pension. It is a bunch of BS perpetrated by mainly anti-employee interests at the expense of workers.

With a DB pension, you pay NOTHING into it. With a 401(k), you are paying for your own pension. If you have to put 10% into the 401(k) program your employer just started in place of your DB pension, that is a 10% paycut. How much does THAT cost during a 30-year career? AND, you are assuming all the risk that nothing will be there when you retire. (Anyone kept track of the stock market over the past few months-- or even couple of years?)

So, to answer your question, Is it bad news? The answer is YES, most definitely.

The real question is, Is a DB pension realistic in this day and age? Of course the conventional business community wisdom would say no. But I can't help but wonder if all workers across many industries and employers would take ACTION to stop the erosion of things like pensions, if maybe the answer would be different. Sure Joe Blow may have to pay $31 instead of $29 for his transcon ticket but if we were all a bit more unified (hello jetBlue, Delta, and Southwest F/As, none of whom have DB pensions-- and, except for DL, that would include pilots as well) maybe things would be different.

But maybe I am just dreaming...
 
Turning every stone except the one that says management on it. There are some people that I work with that cannot afford to contribute to the 401K, this would be a benefit to UAL Corp. I do not plan to retire for a while, so I can take it, or leave it, right now. I would prefer to maintain shift and pay right now. "Unions feed their young to the lions."
 
My heart goes out to all those affected. To work all the years and be told it will be there and now it appears that it won't. I wish I had the power to change that outcome. Hold your heads high.
 
you can bet your sweet a$$ that the top 40 or 50 vp's and their a$$ kisser's pension will stay intact. its the same crap at all airlines soon!