UAL Seen Major Beneficiary Of Pension Law
04.12.04, 3:38 PM ET
Standard & Poor's Ratings Services noted that the new pension legislation passed by the U.S. Congress, and widely expected to be signed by President Bush, allows deferral of most required pension contributions by airlines for 2004 and 2005, trimming the carriers' near-term cash commitments. According to S&P, UAL (nyse: UAL - news - people ) unit United Air Lines, currently seeking to reorganize in bankruptcy, is the biggest beneficiary of the law. The legislation also should have "material benefits" for AMR (nyse: AMR - news - people ) division American Airlines and Northwest Airlines (nasdaq: NWAC - news - people ), the ratings service said. S&P will not change its ratings or outlooks for these carriers as a result of the law. It noted that UAL is awaiting a decision by the federal Air Transportation Stabilization Board on its application for a $1.6 billion loan guarantee needed to emerge from Chapter 11. According to S&P, United faces $1.1 billion of minimum pension funding requirements this year and a total of $4.1 billion through 2008. "By easing near-term cash requirements, the legislation gives UAL more near-term financial flexibility, making their proposed business plan more persuasive and thereby improving the chances of receiving a federal loan guarantee," S&P said. The ratings service noted that Delta Air Lines (nyse: DAL - news - people ) also has substantially underfunded pension plans, but has already contributed $325 million of a planned $440 million for this year. The exact effect of the pending pension legislation on required contributions for each airline this year and next cannot be easily determined based on public information" S&P said. The ratings service added that the airlines are likely to provide estimates of those effects in upcoming first-quarter earnings teleconferences. "The main benefit of the pension legislation is to provide more flexibility in case outside events, such as prolonged high fuel prices or major terrorism, place renewed pressure on airlines' liquidity," S&P said.
04.12.04, 3:38 PM ET
Standard & Poor's Ratings Services noted that the new pension legislation passed by the U.S. Congress, and widely expected to be signed by President Bush, allows deferral of most required pension contributions by airlines for 2004 and 2005, trimming the carriers' near-term cash commitments. According to S&P, UAL (nyse: UAL - news - people ) unit United Air Lines, currently seeking to reorganize in bankruptcy, is the biggest beneficiary of the law. The legislation also should have "material benefits" for AMR (nyse: AMR - news - people ) division American Airlines and Northwest Airlines (nasdaq: NWAC - news - people ), the ratings service said. S&P will not change its ratings or outlooks for these carriers as a result of the law. It noted that UAL is awaiting a decision by the federal Air Transportation Stabilization Board on its application for a $1.6 billion loan guarantee needed to emerge from Chapter 11. According to S&P, United faces $1.1 billion of minimum pension funding requirements this year and a total of $4.1 billion through 2008. "By easing near-term cash requirements, the legislation gives UAL more near-term financial flexibility, making their proposed business plan more persuasive and thereby improving the chances of receiving a federal loan guarantee," S&P said. The ratings service noted that Delta Air Lines (nyse: DAL - news - people ) also has substantially underfunded pension plans, but has already contributed $325 million of a planned $440 million for this year. The exact effect of the pending pension legislation on required contributions for each airline this year and next cannot be easily determined based on public information" S&P said. The ratings service added that the airlines are likely to provide estimates of those effects in upcoming first-quarter earnings teleconferences. "The main benefit of the pension legislation is to provide more flexibility in case outside events, such as prolonged high fuel prices or major terrorism, place renewed pressure on airlines' liquidity," S&P said.
