US Airways May Liquidate :

Dea Certe

Aug 20, 2002

This hearing scheduled for March 18th, do you have more details as to what time and where? Would it be a good idea for all US Airways employees to show up in uniform?

I'd love to be there.
US Airways May Liquidate Without Resolution of Pension Issue
Alexandria, Virginia, Feb. 21 (Bloomberg) -- US Airways Group Inc., the bankrupt airline seeking to emerge from Chapter 11 reorganization by April, told a federal judge it will have to liquidate unless it gets approval to terminate a pilot pension plan covering 7,000 to 8,000 people.
The seventh-largest U.S. carrier has asked U.S. Bankruptcy Judge Stephen Mitchell for permission to end the plan as of March 31, saying last month that it can't make $2 billion in pilot payments due over the next seven years.
A lawyer for Arlington, Virginia-based US Airways told Mitchell today that the pension issue is preventing the company from accessing the final $200 million of a $500 million bankruptcy loan from Retirement Systems of Alabama. As a result, US Airways yesterday missed payments totaling $19.7 million on debt related to five Airbus A330 airplanes.
``If we can't access the liquidity we need, this case will fail,' US Airways bankruptcy lawyer Jack Butler of Skadden Arps Slate Meagher & Flom, told Mitchell at a court hearing. ``There is no way this company will ever pay the pension benefits at issue.'
US Airways sought to end the retirement expense after failing to gain approval from Congress or a U.S. pension agency to stretch the obligations over a longer period.
Termination of the pension plan would shift responsibility for retirement payments to the Pension Benefit Guaranty Corporation, a government agency set up in 1974 to pay benefits when a company plan fails.
Payments through the agency would be lower than obligations under the current plan. US Airways has said it will commit $850 million over seven years to a replacement retirement plan.
Pilot Protests
Dozens of US Airways' active and retired pilots showed up for the standing room only hearing on the issue. Mitchell rejected procedural objections made by the pilots' lawyers seeking to dismiss or delay the hearing.
The judge will rule on US Airways' request as early as Monday, when the airline is scheduled to finish presenting its case.
``The timing is critical,' said David Bronner, who heads the Alabama pension fund and has pledged a $240 million investment in addition to the bankruptcy financing. ``You don't have the ability to say let's study this for the next six months.'
US Airways said yesterday it's in talks with Bronner's Alabama retirement fund on meeting conditions to borrow the final $200 million.
Retirement Systems is slated to get a 37 percent stake in US Airways after the carrier's reorganization. US Airways, which filed for bankruptcy in August, said last week that it's on track to emerge from Chapter 11 by March 31. A hearing is scheduled for March 18.
"Mitchell rejected the pilot's lawyers objections to dismiss or delay the hearing". I wonder what that means? Savy
Pitbull, You are correct. He will be first in line and get his $300,000,000. No profit, but no loss either. Savy
On 2/21/2003 9:59:41 PM savyinvestor wrote:

There will be no emergence unless the company eliminates the pension problem. Bronner could care less if employees showed up at all. He is in a win no matter what situation. Even if he liquidates U he will sell assets and take his profit and leave. He bargains from a position of power and ALPA seems to have missed that point. He is a businessman and only looks at the bottom line. Sad, but true. Savy


What profit do you speak of for RSA. Most he will receive is his DIP money that he lent U. He has not given the other $200 million yet as part of the DIP $500 Mils. We have not emerged from BK so he has not given his investment money yet, and he does not own any seats on the Board yet. GE Capital has given U $127 Million to draw down on starting Jan. 27th. That is part of a $300 million investment in which GE gets 5% stake for. So when you speak of profit, as you are keenly aware, we are not out of BK. Most RSA will receive is the $300 mils back.
There will be no emergence unless the company eliminates the pension problem. Bronner could care less if employees showed up at all. He is in a win no matter what situation. Even if he liquidates U he will sell assets and take his profit and leave. He bargains from a position of power and ALPA seems to have missed that point. He is a businessman and only looks at the bottom line. Sad, but true. Savy
(Moved from another thread that was closed)
Posted: 2/21/2003 10:25:34 PM


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US Airways: Faces Liquidation if Pension Plan Not Dropped

ALEXANDRIA (Dow Jones) - US Airways Group Inc. told a bankruptcy judge Friday that the company faces almost imminent liquidation if it isn't permitted to terminate the pension plan for its 6,000 pilots.

The airline faces a $1.6 billion gap over the next seven years between its pension assets and its liabilities, the company said Friday. Resolution of the issue is the last major hurdle it faces to meet its goal of emerging from bankruptcy protection by the end of March.

But the pilots, who have suffered 1,800 furloughs and have already agreed to $ 565 million in annual wage concessions to try to keep the company afloat, say termination of their pension is too much to bear. Nearly 100 pilots attended Friday's hearing to show their displeasure.

"We have already sacrificed a lot," said Bob Lamborn of Kennett Square, Pa., a US Airways pilot for 17 years. "To have them come after our pension now, it's a personal affront."

If US Airways gets what it wants, the federal Pension Benefit Guaranty Corp. will take over the plan. In that case, most pilots would receive a pension no greater than $28,500 a year.

That would be supplemented with a new, replacement pension plan implemented by the airline. But the new pension plan would provide defined contributions instead of defined benefits. That means an older pilot would have little time to accumulate savings, while younger pilots would have to a hope for a strong stock market to build a significant nest egg.

If the old plan were to remain intact, most pilots would receive an annual pension of $50,000 to $70,000. Some are in line to receive $100,000 or more.

Pilot Dave Ciabattoni of Wallingford, Pa., estimated that his overall pension will at best be cut in half under US Airways' proposal. He said he didn't believe the company's assertion that resolving the pension issue is the airline's final hurdle to financial stability.

"If the difference between solvency and liquidation is this issue, then the company is going to liquidate," he said. "The pilots alone can't save this company."

Many pilots said they also resent the fact that none of the other unions are being asked to sacrifice their pensions. The airline says the pilots' plan is the only one big enough to provide the savings it needs.

US Airways lawyer John W. Butler Jr. said he sympathizes with the pilots, but terminating the plan is necessary to the airline's survival.

"These pilot benefits will never be paid at those (original) levels. They are gone and nobody will get them," Mr. Butler said. "If we do not resolve this issue on a timely basis, there will be no airline."

The Retirement Systems of Alabama, a pension fund for public employees in that state, is the airline's main financial sponsor and is in line to take a controlling stake in the airline upon its emergence from bankruptcy protection. The pension fund is withholding $200 million in financing until the pension issue is resolved, and Mr. Butler said the airline recently missed debt payments as a result.

The airline won a small victory Friday when U.S. Bankruptcy Judge Stephen Mitchell agreed to hear testimony on the issue. Lawyers for several groups of retired pilots had contended that the judge didn't have authority to rule on the issue and that it should be submitted to arbitration.

Testimony is expected to continue next week, with witnesses including US Airways Chief Executive David Siegel.

The March 18 confirmation hearing will be in Alexandria at the Federal Courthouse. The proceeding will begin at 9:30 a.m. and is open to the public.

To get there from DCA, take the Metro from the airport south two stops to King Street. I believe you can use either the Blue or Yellow line. The cost is $1.10 one-way and once you exit the train, simply ask for directions to walk to the courthouse. You can also call the court at 703-258-1200 for specific directions from the Metro station.

I plan on attending Monday's hearing and will let you know the specific logistics.


Savvy asked: "Mitchell rejected the pilot's lawyers objections to dismiss or delay the hearing". I wonder what that means?

Chip answers: It means the judge did not dismiss the company's claim without prejudice; however, he is permitting the case to proceed. In regard to the delay, everybody including ALPA understands the urgency to exit bankruptcy by March 31, and obviiously the judge understands this point most of all.

What's interesting is that the company said it will not use the S.1113 process to terminate the pilot pension plan and RSA indicated there are other alternatives for the company to cut costs or fill the pension hole to obtain the DIP financing.

Reports indicate the bankruptcy court has a conundrum. For the court to approve US Airways' objection, the judge would have to reject a portion of a collective bargaining agreement and violate traditional grievance and RLA law.

Can the judge legally cancel a paart of a contract and if he does, can US Airways or any other airline simply go into court to change a contract provision for any union? For example, can the company then go into court and eliminate all IAM-FSA positions or take all mechanics off of the tugs?

However, if the judge does not disregard RLA and CBA protocols, US Airways reorganization could fail, unless Siegel and Brooner come up with another solution.

Regardless, this will be interesting to watch unfold.

On 2/21/2003 10:13:00 PM savyinvestor wrote:

Pitbull, You are correct. He will be first in line and get his $300,000,000. No profit, but no loss either. Savy
I'm not real sure, but when the pension plans terminate (at liquidation) PBGC may be first in line. Also, the RSA will lose the aircraft lease income, which is exactly why they jumped in here in the first place. So, the RSA could still be a huge loser. Also, GECAS is now a DIP financier, and they would be considered on an equal basis with the RSA. I guess what i'm saying is that it ain't a free ride for the RSA. Of course, Bronner could always jump off the Lusitania (U) and go prop up the Titanic (UAL). And one other thing. If this restructuring fails for some reason which could be construed as RSA or Dave's management team not making a good faith effort, the lawsuits would drag on for YEARS. You can bet that the AFL/CIO would ensure that!

CatIII said: "Chip, Maybe the judge can cut all mainline pilots pay to pay for your pension."

Chiip comments: CatIII, what useful purpose does your comment make? However, I believe it’s important to note ALPA has already taken a 26 to 33 percent and another 8 percent W-2 cut, for a total W-2 concession of 34 to 41 percent.

However, here's the bottom would any of the seven other employee groups like to see their pension plan terminated and the pilot plan remain in effect?

Would any of the other employee groups like it if this occurred?

Why should any employee group or management be singled out for a potentially devastating concession?

Just as it is not right for you or anybody else to take a fourth cut, nor is it right for ALPA to be the only employee group to make three retirement concessions only to see their pension plan terminated, not frozen, but terminated.


First I agree it is not fair but with that said what choices does U have? Are that any real solutions out there.

Also, the pilot group is not the first group to lose their pension. The LTV Corp screwed 1,000's of steelwork's years ago. That is why the PBGC was formed. They went years without any income before the government formed the PBGC.

I feel if U is able to elmiinates the pilots pension ALL others are at risk.

Good Luck