Ual To Miss More Pension Payments

Mar 26, 2004
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Reuters
UAL to Miss More Pension Payments
Friday July 23, 5:07 pm ET
By Meredith Grossman Dubner

CHICAGO (Reuters) - United Airlines said on Friday it plans no further pension payments this year, angering unions who fear the carrier could scrap their retirement plans altogether to lower costs and attract badly needed investors.
The No. 2 U.S. airline told a bankruptcy court judge that plans to hold off on a $404 million contribution in September and a $91 million contribution in October will give it more flexibility to manage its overall assets.

"It's a step to reduce our costs and attract the financing we're going to need to exit bankruptcy," Chief Financial Officer Jake Brace told reporters.

The company did not say when the payments would be made, but demoralized workers fear they will never get that money.

United, a unit of UAL Corp. (OTC BB:UALAQ.OB - News), deferred a $72 million pension payment last week, prompting speculation of deeper cuts.

"While United's action falls short of an outright termination of the pension plans, the company's actions make termination of the pension plans likely," Greg Davidowitch, president of the Association of Flight Attendants, said in a statement.

The International Association of Machinists said it was exploring legal action. "We want to know if United is trying to dump its pension obligations on U.S. taxpayers as another way to get the federal government to finance its bankruptcy following their failed bid to receive a loan guarantee," Robert Roach, IAM general vice president, said in a statement.

Separately, United told the bankruptcy court it had arranged an additional $500 million in debtor-in-possession financing to keep operations going during restructuring.

The airline, which has been in Chapter 11 since December 2002, has until June 30, 2005, to repay the loans. Lenders include General Electric Co's (NYSE:GE - News) GE Commercial Finance, J.P. Morgan Chase & Co. (NYSE:JPM - News), Citigroup Inc. (NYSE:C - News) and CIT Group Inc. (NYSE:CIT - News).

The company also received another 30-day extension to file its reorganization plan but said it will likely seek a "multi-month" extension in August.

United was denied a $1.1 billion government loan guarantee last month, forcing it to restructure plans for securing bankruptcy exit financing and putting immediate pressure on the Elk Grove, Illinois-based company to reduce ballooning pension costs.

United has four employee pension plans which now are underfunded by about $4.1 billion over the next five years.

"Because United's existing pension funding obligations will remain a huge financial burden after exit, it is incumbent on United to study all possible options and to determine whether United can sustain this burden and still attract exit financing," the company said in an update to the court on its reorganization.

Randy Clerihue, a spokesman for the Pension Benefit Guaranty Corp., the federal agency that insures corporate pensions, said it was rare for bankrupt companies that skip contributions to make up the shortfall.

"Obviously it heightens concern," Clerihue said. "It's not a foregone conclusion that plans terminate, but we don't often see those plans riding through without those shortfalls corrected."

US Airways (NasdaqNM:UAIR - News) terminated its pilots' pension to exit bankruptcy last year.

Airlines, particularly the biggest carriers, have been pressured by record high fuel prices and competition from low-cost carriers.

Brace told reporters United's fuel costs this year are now estimated to be $900 million more than projected. But he did not expect any major changes to the size or scope of United's route network.
 
Beats me...why that man is not in front of a grand jury only people with George W's ideology know. As for the pensions....gee, I wonder if they're gone? :up:
 
The Ronin said:
Beats me...why that man is not in front of a grand jury only people with George W's ideology know.
What exactly has he done that is illegal? By the way, nice GWB non-related insert. Meaningless.
 
blueskies4ever said:
"We want to know if United is trying to dump its pension obligations on U.S. taxpayers as another way to get the federal government to finance its bankruptcy following their failed bid to receive a loan guarantee," Robert Roach, IAM general vice president, said in a statement.
Ah, duhhhh. Of course that's what they're planning to do. All airline managements are planning the same thing. While times are tough and they have a solid economic excuse, OF COURSE, they're going to terminate the pensions and dump it on the goverment. Well, not everyones. You can be sure the execs are getting their pensions UP FRONT and under the table.

And the pilots thought they were going to get more than $28k a year in retirement. Let's see . . . . . $24k in Social Security + $28k in PBGC pension = $52k a year minus taxes of course. But then there's that period between aged 60 and when SS benefits start . . . . not to mention the medical plan that you'll be paying $700 a month for . . . . . until you get on Medicare with the rest of the Walmart retirees.

And you thought you were a valued "professional." City bus drivers probably get better pensions.
 
Its not just United, and its not just the airline industry. Defined benefit plans in the US are becoming obsolete when trying to compete in a global economy. There was a very good article in the Economist last week concerning the changing times.
 
Just like the steelworkers were getting screwed. I'm only 30 but I tell you there will be a bunch of guys jumping out of the top to get their pension. Estimates perhaps as high as 700. Massive training events could be on the horizon. This sucks for everyone all I can say is that if there gonna cancel the pensions (and looks like they will) UAL better have a plan to annihilate the competition.
 
boeing787 said:
there will be a bunch of guys jumping out of the top to get their pension. Estimates perhaps as high as 700. Massive training events could be on the horizon.
Hey, at least with all the retirees leaving, you'll move up and maybe make more money to fund your own retirement :up:
 
Maybe I am missing something, but I don't believe it makes sense to try to jump out now to try to keep your pension intact. That is not how it works. If the plans are terminated, they are terminated for all-- gone-- poof-- for both those who are retired by the date of termination and those who haven't yet retired. All will simply be turned over to the PBGC and be subject to those maximums. It is not as if retiring now means your pension is untouchable.
 
Does UAL have a lump sum option like Delta? If so, I could imagine many would take it and leave like the Delta guys are doing.
 
If you can retire early, take a any kind lump sum and run, you'd be a fool not too . . . . regardless of what company you're working for. If you don't, the CEOs are going to get it. You can be assured of that. The writing is on the wall. You're competing with the Chinese and JetBlu-ese's of the world . . . . and they don't have defined pension plans.
 
I can only speak to the F/A plan, and we have no type of lump sum option that I am aware of.
 
I believe Delta pilots are the only ones who have a lump sum option. UA pilot's have several partial lump sum options that give a relatively small % up-front payout in return for a lower monthly benefit.

"Lump Sum" is a misleading term because it implies you can take all your $ and run. It doesn't work like that. For UA pilots, even taking the largest "Lump Sum" would not fund a person's retirement years without supplemental income from other sources. (ie: monthly pension, 401K, DAP, IRA's, Military Pensions, Other investments, etc.)
 
Didn't United see a spike in retirements just prior to bankruptcy? I thought that was pilots taking lump sums. And Delta has as big a deficit as United. If any Delta pilot was eligible today for a reasonable lump sum, that would be something to jump on.
 
Whadayano said:
Didn't United see a spike in retirements just prior to bankruptcy? I thought that was pilots taking lump sums. And Delta has as big a deficit as United. If any Delta pilot was eligible today for a reasonable lump sum, that would be something to jump on.
Correct me if I'm wrong, but US was the carrier with the $1 million lump sum option for ALPA. (I think.)