US Air Pilots Brace for Plan Wipeout



US Air Pilots Brace for Plan Wipeout
NEW YORK (Reuters) - US Airways Group Inc. pilots are expecting some unwelcome news as soon as Thursday -- a notice from their bankrupt employer that billions of dollars they have socked away for retirement through their pension plan may be wiped clean and replaced with leaner benefits to help save the company.
US Airways President and Chief Executive David Siegel told pilots in a Jan. 28 letter to expect the bad news. The airline's current pension plans will fall $3.1 billion short of funds over the next seven years because the shrunken stock market has depleted their assets, and US Airways is not able to refill the larders.
US Airways has asked Congress to pass a measure that would more than quadruple the span of time over which it must make payments to restock the plan, which is currently set at seven years. The pilot's plan has only half the funds it needs.
But Congress has so far refused twice to step in, and US Airways acknowledged in the letter that winning help from Congress would be the equivalent of a 'hail Mary' pass in football.
Because US Airways is holding itself to a fast-track timeline during its bankruptcy reorganization, it claims it must resolve its huge pension problem before Friday, the last day it can mail its voluminous business plan to its creditors for a vote.
The airline also needs to fix the dilemma to get another $200 million of emergency financing and gain final approval for $900 million in federal aid through loan guarantees. Because it wants to emerge from bankruptcy on March 31, US Airways has to announce its intention to terminate the plan at least 60 days before the actual event to meet that deadline.
If shutting down this company were the best solution, we would have done that already, the airline said. US Airways is worth saving.
To solve the issue fast, US Airways wants to sweep out its pilots' current pension plan and use whatever funds the plan has to replenish the pensions of other workers. The pilots' plan makes up about two-thirds of the airline's total fund, and US Airways said canceling mechanics' and flight attendants' plans instead would not free up enough obligations for it to gain needed financing.
The Air Line Pilots Association, which represents about 4,000 active US Airways pilots, has said it will oppose termination of the plan, which means US Airways will have to get a bankruptcy court judge's approval instead.
Siegel told pilots the airline will replace their retirement incomes with a new plan. The plan must be negotiated with the Pension Benefit Guaranty Corp., a federal agency that stands behind corporate pension funds and will guarantee US Airways' pilots a maximum of $28,000 a year in retirement.
Siegel also said US Airways will keep searching for a solution from Congress during the coming 60-day period.
The airline has proposed a defined contribution plan, to which it would inject a certain amount of money based on pilots' salaries and seniority, according to Roy Freundlich, a spokesman for the unionized pilots.
On average, Freundlich said US Airways' pilots would see the pension benefits they have already earned on the job reduced by about 45 percent. US Airways' calculations said a retiring captain with 30 years of experience would receive a total of $1 million from government-guaranteed benefits and the new pension plan combined.
Freundlich did not say the pilots would threaten to strike over the plan's termination, but he said the group was mobilizing all ALPA resources on this issue.
We have not ruled out any of our options, he added.
US Airways also asked its bankruptcy court judge, Stephen Mitchell of the Eastern District of Virginia, to formally extend for the second time the period in which it, exclusively, can file and gain approval for a plan of reorganization. The judge will consider the request on Feb. 20.