Nice Try UAL

[Beechnut]

Reuters
House votes to stop UAL pension default
Friday June 24, 1:34 pm ET

WASHINGTON (Reuters) - The U.S. House of Representatives on Friday voted to block bankrupt United Airlines (OTC BB:UALAQ.OB - News) from defaulting on its pension plans and shifting them to the Pension Benefit Guaranty Corp. (PBGC).

The provision was attached to a spending bill expected to pass the chamber later in the day. The bill would still have to pass the Senate before it could take effect.

More than 30 Republicans joined the proposal's Democratic sponsors in supporting the measure by a vote of 219-185. It would stop the PBGC from carrying out a court-approved agreement to take over four pension plans from the bankrupt airline.



http://biz.yahoo.com/rb/050624/airlines_congress_united.html?.v=2

 

[General Lee]

What does this mean now? Will United have to continue paying them? This may eventually fall under the pension reform bill, which would make the airlines (DL included) eventually pay off the pensions, in a stretched out period of time. Very interesting.



Bye Bye--General Lee

 

[propjob27]

Thank god. I hope this one sticks and sends a message to other airlines considering defaulting on their pension plans.

 

[Mugs]

If it passes the Senate then the agenda is obvious. Liquidate UAL through government action to bail out the industry for the short term. In the long term, the same issues will come into play all over again as current and upstart LCCs fill in the void.

 

[race#53]

If it passes the Senate then the agenda is obvious. Liquidate UAL through government action to bail out the industry for the short term. In the long term, the same issues will come into play all over again as current and upstart LCCs fill in the void.

Mugs,
Now you at UAL and MDF at Sw are on the same side, keep the Gov out of it!!
i agree with you both this time.

 

[race#53]

What does this mean now? Will United have to continue paying them? This may eventually fall under the pension reform bill, which would make the airlines (DL included) eventually pay off the pensions, in a stretched out period of time. Very interesting.



Bye Bye--General Lee

General,
First no ATSB loan, now no pension help, looks like some lawmakers must seeing
$$$$ from a UAL liquidation.

Their only problem now is how to control the Judge who determines where UAL's $$$ go.

You have to admit it is interesting.

UAL......your move next.

 

[race#53]

Here is a copy of the amendment;

9:58 A.M. - Amendment offered by Mr. George Miller.

An amendment to prohibit funds appropriated by the Act from being used by the Pension Benefit Guaranty Corporation to enforce or implement the "Settlement Agreement By and Among UAL Corporation and all Direct and Indirect Subsidiaries and Pension Benefit Guaranty Corporation", dated April 22, 2005.

Looks like it just prohibits funds from the bill to be used for UAL pension but that
was never the case anyway...looks like the usual smoke and mirrors from our lawmakers.

 

[skykid]

If it passes the Senate then the agenda is obvious. Liquidate UAL through government action to bail out the industry for the short term.

That would be the outcome, but I doubt if all in congress thought that out. Some probably actually think by being told to catch up and pay the pensions UAL could and would do it, and the employees would live happily ever after. The reality is the PBGC gets the pensions, one way or the other. It also occurs to me that many in congress probably don't know how the PBGC works. The measure states:

...the PBGC could not spend government funds to carry out a court-approved agreement to take over four pension plans from the bankrupt airline.

Okay, that is not what is happening. It is way to early to speculate (esp based on news releases) on if this measure could even hold up if the Senate also passed it.

 

[skykid]

An amendment to prohibit funds appropriated by the Act from being used by the Pension Benefit Guaranty Corporation to enforce or implement the "Settlement Agreement By and Among UAL Corporation and all Direct and Indirect Subsidiaries and Pension Benefit Guaranty Corporation", dated April 22, 2005.

Thanks for posting that. Sounds like a symbolic gesture from congress.

 

[ironwedge]

Just a neat way for congress to kill UAL. When UAL declares chapter 7, guess what? - The PBGC will be forced to assume the pensions.

 

[Mugs]

Thanks for posting that. Sounds like a symbolic gesture from congress.

Here is what the amendment's sponsor said:

Nevertheless, the vote sends a message to United Airlines (UALAQ: news, chart, profile) and other employers, said Rep. George Miller, D-Calif., the primary sponsor of the amendment.

"Dumping pension plans onto the federal government is not a way to cut your labor costs - it is a last resort to save your company," Miller said.

UAL is already there. The financial markets have been telling UAL that for a long time. I guess Mr. Miller hasn't figured that out yet. More ready, fire, aim stuff form our lawmakers.

 

[General Lee]

I think what it is saying is that United will have to eventually pay its obligations, but maybe over an extended period of time. All of the majors will get some time to pay them off, and why should United be any different? It may be easy to dump the pensions and start over, but what happens when United is profitable in 5 years? They should have to pay their obligations to their hard working retired employees. Extending the payments over time helps the airlines, and this wouldn't give United a free pass in the future. I don't see Congress doing this to liquidate United. Nah.


Bye Bye--General Lee

 

[Boeingman]

What is happening here is the PBGC has been doing some backdoor lobbying to stop this type of action from the bankruptcy courts. It is obvious the PBGC can not allow this type of precedent to go unchallenged. This is not just about UAL but the ramifications for potential future pension dumping will wipe out the PBGC. The amount of monies that will need to be collected to make the PBGC solvent will make the plan unworkable for healthy companies paying into the system.

Should the bankruptcy court be overruled with this legislation and UAL liquidates, the PBGC will be one of the first in line to recover money from assets. As it stands now with the action of the bankruptcy court, the plans are dumped on them with no financial recourse or ability to recover funds from the UAL estate.

They will become the most tenacious creditor in the process and they could push for a UAL liquidation to meet the pension underfunding. They also have the ability to attach assets even though they are an unsecured creditor. I have been saying this for a long time, just look at Eastern and the pension debacle over there during the bankruptcy and eventual shutdown. That will give all of you a preview of things to come at UAL.

I am not going to be popular with this statement, but no company should ever be allowed to walk from pension obligations under any circumstances. UAL has billions in unencumbered assets that should be liquidated to cover pension underfundings or defaults. They are contractually earned obligations. Period.

 

[General Lee]

I agree with some of your statements, and that is why Pension reform should be enacted. If Congress agrees to help the airlines extend out their payments, then the airlines WILL HAVE TO PAY eventually, instead of dumping them. This is not a handout, but rather making the airline pay their obligations, eventually.


Bye Bye--General Lee

 

[klhoard]

.
.
.
This reminds me of my first wife. . . . she would write bad checks and I ended up being the "PBCG". . . .
.
.
.

 

[michael707767]

I am not going to be popular with this statement, but no company should ever be allowed to walk from pension obligations under any circumstances. UAL has billions in unencumbered assets that should be liquidated to cover pension underfundings or defaults. They are contractually earned obligations. Period.

I agree. At an absolute minimum, a company should not be able to terminate a pension if management pensions are fully funded. Don't know about UAL, but I know that would apply to us. On other change I think needs to be discussed is the rules preventing a company from renegotiating its pensions. I mean, if the UAL labor groups (for example, dont get pissy anyone) want to renegotiate a lower priced pension, they should be able too. I mean, isn't that better than loosing the whole thing?

 

[capt. megadeth]

I am not going to be popular with this statement, but no company should ever be allowed to walk from pension obligations under any circumstances. UAL has billions in unencumbered assets that should be liquidated to cover pension underfundings or defaults. They are contractually earned obligations. Period.

Why wouldn't you be popular for this statement? It's a no brainer.

 

[320AV8R]

I think what it is saying is that United will have to eventually pay its obligations, but maybe over an extended period of time. All of the majors will get some time to pay them off, and why should United be any different? It may be easy to dump the pensions and start over, but what happens when United is profitable in 5 years? They should have to pay their obligations to their hard working retired employees. Extending the payments over time helps the airlines, and this wouldn't give United a free pass in the future. I don't see Congress doing this to liquidate United. Nah.
Bye Bye--General Lee

General-

You're right. Congress doesn't want the other airlines to dump their pensions on the PBGC....who's already $23 BILION in the hole. This would be the next S & L crisis.

320AV8R

 

[320AV8R]

I mean, if the UAL labor groups (for example, dont get pissy anyone) want to renegotiate a lower priced pension, they should be able too. I mean, isn't that better than loosing the whole thing?

Michael707767,

Current Federal Law (ERISA requirements) prohibit the reduction in benefits, through negotiations or otherwise. You have to fully fund the plan. If that is not possible, it leads to plan termination....where UAL is now.

Freezing the plan eliminates the plan from accruing any additional liabilities, but a frozen plan must also be fully funded, or terminated.

320AV8R

 

[General Lee]

General-

You're right. Congress doesn't want the other airlines to dump their pensions on the PBGC....who's already $23 BILION in the hole. This would be the next S & L crisis.

320AV8R

Yeah, I think Congress thought, "Why shouldn't we include United in all of this? There is a chance they could become profitable in 5 years out of bankruptcy, and why shouldn't they continue then to pay off their obligations to their retired employees?" I think that is fair.


Bye Bye--General Lee