ALPA, Defined Benefit Pensions and Alaska

[FL510GV]

This is going to affect the negotiation process. What to think?



From the ATW website:

ALPA concedes pilot pension plans must change
Dateline:**CENSORED** Monday September 06, 2004**CENSORED** **CENSORED****CENSORED****CENSORED**

The Air Line Pilots Assn. said Friday that it is "ready to help build a new pension model" for airline pilots, including making changes to existing plans for younger pilots while protecting the benefits of those closer to retirement.

The move comes as many US network airlines face huge pension funding gaps and one, US Airways, has terminated its pilot pension plan and replaced it with another. United Airlines is believed to be on the verge of terminating its plan, while Delta Air Lines could be next. Fear that this may occur has caused an exodus from Delta of senior pilots, who prefer early retirement and a smaller lump sum payout rather than having their pensions potentially reduced in a bankruptcy.

When a company terminates its pension plan, the US Pension Benefit Guaranty Corp. assumes only the insured portion of the plan. For pilots, the difference between a company pension and PBGC amounts can be tens of thousands of dollars each year. Although the situation at American Airlines is not as critical, pilots there are worried too.

In Friday's statement, ALPA President Duane Woerth said the organization is "extremely concerned about the future of defined-benefit pension plans for pilots unless we provide a method for the nation's already stressed air carriers to deal with their current unfunded pension obligations. Tens of thousands of pilots risk losing benefits they have earned."

According to Woerth, "the cornerstone of any solution to the pension crisis must be long-term amortization of current unfunded obligations," a step that will require changes in federal pension law. "This relief is the key that can unlock the door to long-term capital financing," he stated.

For younger pilots with many years to go before retirement, the solution for some airlines may lie in transitioning away from "excessive reliance" on traditional defined-benefit plans, either by replacing them or by devising combination plans with a larger defined-contribution component. Such changes "will have to be negotiated separately at each airline," Woerth added.--Perry Flint

 

[AK737FO]

Can you say 401K

Like social security, I have no illusions of the "A" plan still being here when I hang up my hat (2030). The question is, what can we get to replace it? What Alaska management is offering in the "vision 2010" plan is seriously lacking. A guy like me would probably be walking away from a Million plus by switching to there proposed plan. Kind of hard to leave that king of money on the table, even if you risk loosing all of it to get it.
I fully realize that the old A plan is going to have to go away someday. The financial burden on the company will eventually be to much to handle. So - lets negotiate a real replacement.
Maybe the sky is falling - maybe in 20 years cabatoge will rule the day, we will be "round eye" captains earning half of what we earn as F/O's today, we will fly with young "not so round eye" F/O's who earn $20 an hour, A plans will be gone, and we will learn to live with it - or find a new line of work. I hope not, but who knows - this industry is crazy. What other industy sells its product for less than it costs to produce it? Year, after year, after year. Then runs to the employees, or the governement, or bankruptcy judges to try to get a quick fix on the bottom line.
All I know is that I plug all I can into my 401K. It is the only thing I can count on.

 

[ferlo]

I Agree, the A plan is dead no matter which way you want to look at it. This is our first and best chance to negotiate it away with the best possible deal. At least we have some control over how it leaves unlike some of our less fortunate union brothers. If they offer 13+% on the B fund they can have mine. Even if it pans out to be less than what the A plan would have theoretically offered when I go. I don't trust this industry any further than I can throw it.
Also, if I decide I want to retire 5 years early, I'm not forfieting 35% of my retirement to do so. I simply leave with all the cash I've got. So many guys are still here because they are held hostage by the crazy penelty. Wouldn't it make sense to ENCOURAGE the most expensive, highest paid, most vacation, most sick time, most medical prone pilots out of your company instead of raping them if they leave? I don't get it. I won't vote for one dime of a pay cut but they can have my A plan. If others want to keep it then that's their choice but it sure would be nice to have an alternative.

 

[Singlecoil]

I agree that a 13% B Plan would get me to switch quite happily but I disagree that the A Plan is worthless. What is wrong with defined benefit plans right now is several years of poor market returns, forcing the companies to contribute much more than they would like, and low interest rates, forcing companies to pay out more in lump sum payments as well as higher raw contributions.

These plans did make perfect sense financially and worked for years. What changed was the market; interest rates were never supposed to get as low as they have been. Guess what? They are going back up and with them the solvency of many of these plans. With our ever increasing federal deficits, the government has to borrow money by selling bonds to cover the shortfall in receipts. More bonds on the market mean higher interest rates to create more demand for bonds. Higher interest rates mean companies can make smaller contributions year by year, as well as smaller lump sum payments, and still be abiding by their contractual agreements.

Remember a month ago when EVERYONE said oil prices were only going to go up? They've been going down lately. Just when EVERYONE believes in something (A Plans are dead) the market shifts and the opposite has a tendency to occur. If we want to negotiate away the A Plan for a decent alternative, I could vote for that. But to assume they are dead is to assume we have to take a pay cut because the planes are so full we can't raise fares. The only way the A Plan is "going away" is in bankruptcy which is a very long way off.

 

[ferlo]

singlecoil,

You also make very valid points. The A plan is far from worthless. The biggest problem with the A plan is that it's nothing but an empty promise until the day comes when you get it. So is it worthless for guys retiring now, no way. Will it be worthless for guys retiring in 27 years? Who knows, that's the problem. Every Airline in existance is 2 years away from liquidation given horrible managment. Nobody is 100% safe. Nobody. You don't know they are worthless until often times it's too late.
I think our pilots should have the option to take either plan. Of course I'm assuming they are giving up way more than a ridiculously low 6% 401k match. America West has a 7% B fund and a 3% match. American has an 11% B fund PLUS an A Plan. Therefore, I wouldn't even consider anything below 13% But that's me. I have a long way to go before retirement, nearly 29 years. 13% wouldn't work for many others. That's why there should be a choice. But don't misunderstand me, they are going to have to cough up big time for me to even consider the option. As far as pay cuts, I can't say it enough, No F'ing way. Not one dime. Somebody needs to draw the line for this career and we're the only ones left that can do it without the strongarm of BK.

 

[mach none]

Ferlo, singlecoil and AKfo,

I agree with you. I ran the numbers and came up with a 12 to 15% B fund. That was at a return rate of 6 to 8%, which is realistic. That would come close to matching the A fund. Which for me is woth about 2 million dollars. I will have a 27 year career here at AS.

This is my sixth airline and I don't trust anyone in management. I have worked for airlines with proposed route maps that look exactly like our proposed 2010 plan and promises of huge growth. They are all out of business. I for one want the money in my name.

Ferlo, you are correct when you said, no one is safe, NO ONE. Not Alaska, Southwest, Jetblue or whoever. We are all exposed to poor management decisions. I for one will opt out of the pension if the company puts up enough cash in the B fund. What they are offering right now is a joke. The business model is changing in all of corporate america. The pension is slowly going away for the average working stiff. Approxitmately 20 years ago, 300 companies offered pension plans, now it is around 30. The numbers are not spot on, but you can clearly see the trend.

singlecoil,

You also make very valid points. The A plan is far from worthless. The biggest problem with the A plan is that it's nothing but an empty promise until the day comes when you get it. So is it worthless for guys retiring now, no way. Will it be worthless for guys retiring in 27 years? Who knows, that's the problem. Every Airline in existance is 2 years away from liquidation given horrible managment. Nobody is 100% safe. Nobody. You don't know they are worthless until often times it's too late.
I think our pilots should have the option to take either plan. Of course I'm assuming they are giving up way more than a ridiculously low 6% 401k match. America West has a 7% B fund and a 3% match. American has an 11% B fund PLUS an A Plan. Therefore, I wouldn't even consider anything below 13% But that's me. I have a long way to go before retirement, nearly 29 years. 13% wouldn't work for many others. That's why there should be a choice. But don't misunderstand me, they are going to have to cough up big time for me to even consider the option. As far as pay cuts, I can't say it enough, No F'ing way. Not one dime. Somebody needs to draw the line for this career and we're the only ones left that can do it without the strongarm of BK.

 

[av8instyle]

No F'ing way. Not one dime. Somebody needs to draw the line for this career and we're the only ones left that can do it without the strongarm of BK.

Agreed!

 

[AK737FO]

Pay Rates

Fella's,
I like the determination, I like the idea of drawing a line in the sand - NONE SHALL PASS! But I'm a realist. We WILL take a pay cut. No way around it. Our boys at the table will do their best and they have my full support, but what do you think they are going to do? Walk out of there with a raise for all of us? Walk out of there with our current rates? No way. That is negotiations. They will give a bit here to take a bit there. The company wants our pay check. We will give them some, and by doing so, gain some ground in other area's in the contract.

If it goes to an arbitrator, he will give us a pay cut. Period, no way around it. It won't be 23%, the arbitrator wants to work again too, but it will be middle of the road.

I hope it is not much, I've got a morgage like everyone else. But there is a pay cut on the horizon for us. We can beat our chest and chant "hold the line" all we want, but in reality we can only hope to generally improve our contract in terms of work rules, vacation, A to R downgrades, and on and on. These negotiated improvements will be "paid" for by our pay cuts.

Now don't go getting all nasty on me. If you have Alaska Wings pinned to your leather jacket, you have my respect, even if we have different opinions. I'm not a pessimist, just a realist.

 

[av8instyle]

That may all be true but I don't agree that there will be a bunch of improvements on a mid term deal. We're gonna lose trips touching, A plan for newbies, a bunch of other misc crap, AND money.

Why do the old craniums want a mid term deal? Because it would give them book rates for retirement, which arbitration probably won't do.

If we're gonna take 11% from a mid term deal anyway, I'd just as soon take my chances with the arbitrator and get rid of arbitration for the next contract.

I don't think we'd be negotiating a pay cut if we didn't have arbitration on the horizon.

I will caveat that I would reconsider a pay cut if it involved a snap back with a raise tacked on. But I know that's wishful thinking.

I know no carrier is immune, but we're in a lot better position than most everyone else financially, so why should our pilots bleed like we're not?

 

[ferlo]

I agree, we probably are going to take a pay cut. I'm not delusional about that I'm just saying there is no way I"m going to give it to them. They're going to have to take it. If it goes to arbitration, and we get a pay cut there, then at least my lost money has bought me out of future arbitration and the gloves can come off. It's only for two years. I think giving them an option to the A plan is plenty of relief.