U.S. to Take Over UAL Pilots' Pensions

[skykid]

G4G5, I think your logic is way flawed, but you can still keep hoping for a liquidation. Have you noticed all the news analysis that stresses how the PBGC can force liquidation? Me neither. What you have seen is statement after statement where the PBGC estimates how much they will be on the hook for. I'm guesing you work for American. If you do, or if its one of the other airlines with defined pensions. I'd start hoping your wrong.

 

[Boeingman]

G4G5, I think your logic is way flawed, but you can still keep hoping for a liquidation. Have you noticed all the news analysis that stresses how the PBGC can force liquidation? Me neither. What you have seen is statement after statement where the PBGC estimates how much they will be on the hook for. I'm guesing you work for American. If you do, or if its one of the other airlines with defined pensions. I'd start hoping your wrong.

Skykid:

Read up on what happened during the Eastern bankruptcy and subsequent liquidation once the PBGC got their hands involved. They were able to step in front of just about every creditor and lay claim on assets to cover the pension underfunding.

There is no doubt in my mind that they smell some serious, posible terminal financial problems to make this move. Much more serious than what is probably being published. They are unlike any other creditor. They carry a lot of clout with the courts and they will get their money one way or another. Usually, as in EAL, they forced the liquidation of assets to cover the underfunding.

They would much rather let the company solve this mess on their own. They wait to a point where they feel the company, as continuing in its present form, will burn through cash or will become insolvent. At that point they make their move to protect their interests. This is exactly what is occuring. You don't think they want this mess to help UAL do you? Think about it.

I have been saying this for a long time, UAL is not going to be able to just walk away from their pensions without a lot of serious pain inflicted on the company.

Ignore history at your own peril. The PBGC is ruthless.

 

[tranceport]

So why did the PBGC all of a sudden decide to come after the pilots, with one day left in 2004?

It's a very clear message to every airline. Try to pass off your pension on us and we will force you into liquidation.

for all you conspiracy theorists,here's one other explanation. Look at the bold below for the real answer....shocker....it's all about the almighty dollar.
I don't deny the fact that UAL is rudderless and basically SUBSIDIZING low airfares through wage reduction; however, whenever decisions are made, ti's usually always tied to the almighty dollar. Not only does this move 'save' the PBGC money, but it also saves UAL in that a) the decision/outcome is made and there is no doubt going into next weeks hearing and b) more leverage for other work groups. It's all about pitting one work group against another (legacy airline mgmt 101)

United Workers Threaten to Go on Strike
Friday December 31, 9:01 am ET
By Dave Carpenter, AP Business Writer

United Airlines' Flight Attendants Threaten to Stage Intermittent Strikes if Company Ends Contract

CHICAGO (AP) -- United Airlines' flight attendants are threatening to stage intermittent strikes if the company ends their contract and imposes additional salary and benefit cuts.

Meanwhile the United pilots' union expressed outrage at a move by the government's pension agency to begin assuming responsibility for their pensions, which occurred Thursday.

The move saddles the Pension Benefit Guaranty Corp. -- already operating at a $23 billion deficit -- with another huge financial burden. The agency estimated it will be responsible for about $1.4 billion of the plan's $2.9 billion in underfunded assets, making it the third-largest claim in the history of the insurance program.

The labor strife and taxpayer burden come as United moves into its third year of Chapter 11 bankruptcy protection.

"United flight attendants have spoken loudly and clearly," said union leader Greg Davidowitch of the Association of Flight Attendants, announcing that 88 percent of members had approved taking unauthorized strike actions. "They will not allow their employer to exploit the bankruptcy process and strip them of their rights. They are ready to fight."

United said the actions contemplated by the union are prohibited by both the Railway Labor Act and federal bankruptcy law.

"We regret that the AFA continues to take actions which are simply not helpful to United, its tens of thousands of employees, or its customers," spokeswoman Jean Medina said. "We remain committed to considering all workable options and alternatives that will still provide the long-lasting savings United needs to exit Chapter 11 successfully."

The two sides remain in talks over a new contract, and no action would be taken until the matter is resolved in bankruptcy court. Hearings on United's motion to terminate the existing contract are scheduled to begin Jan. 7 if no agreement has been reached.

Negotiations also continue between United and unions representing mechanics, baggage handlers and public contact workers.

The pension agency will be taking over the pensions of more than 14,000 active and retired pilots, many of whose benefits will now be sharply reduced from what they were promised from the bankrupt airline -- a unit of Elk Grove Village, Ill.-based UAL Corp.

The PBGC already was facing the required takeover of United pension plans in 2005. By acting at year's end instead of in May, when the pilots' pensions were to have been terminated, the agency said it can avoid the annual increase in mandated benefit payments and save as much as $140 million in additional payouts.

The action follows a tentative contract agreement between United and its pilots union earlier this month, part of United's effort to slash labor costs heavily for the second time in its two-year bankruptcy restructuring.

Facing $4.1 billion in required pension contributions by the end of 2008, United said earlier this year it would terminate all its existing employee pensions and replace them with much less expensive defined-contribution funds, similar to 401(k) plans.

United issued a statement saying the PBGC's decision "changes nothing with respect to our need to terminate and replace all four of our defined-benefit pension plans." The company says it requires an extra $725 million in labor cost savings to emerge from bankruptcy "as a sustainable, profitable enterprise."

The pension agency had objected to the tentative deal with pilots, who dropped their opposition to the pensions' elimination in exchange for additional financial considerations. But it might have little recourse if the deal is approved in bankruptcy court.

"The decision to take over a pension plan is never made lightly, especially in situations where participants won't get everything the company promised but failed to fund," executive director Bradley Belt said. "I hope the plight of participants in airline pension plans puts an exclamation point on the need for Congress to strengthen the funding rules for defined benefit plans."

The pilots' union deplored what it called an "ill-timed attempt to retaliate" against it, and suggested it might be an "outrageous ploy" designed to undermine the contract ratification vote currently under way among its members.

"ALPA will vigorously oppose any effort by the PBGC to take over the plan before May 1, 2005 or to single out the pilot group for punitive and vindictive treatment in the United bankruptcy," said a statement by the leadership group of the Air Line Pilots Association's United branch.

The PBGC planned to file a formal objection to United's pilots plan in bankruptcy court by Friday, spokesman Randy Clerihue said.

www.pbgc.gov

 

[skykid]

B-man, I know all about the Eastern situation and I know the PBGC will be a creditor if there is a liquidation. However, the PBGC cannot force a liquidation. I wanted to see if G4G5 could admit he was wrong, and he can't. I take your dire predictions with a big grain of salt since you have missed your doomsday prediction time after time. I will give you credit for recognizing the pension issue was going to be the major problem way before most others.

For those hoping for the liquidation, let me help you out and point you in the right direction. It is not going to be the PBGC seizing assests. The pensions are gone one way or another, and the UAL ALPA MEC is at least smart enough to try and face that reality out of court. However, none of the other unions will. What I have known all along is what can kill United is United. Start talking United FAs into the CHAOS nonsense when their pension gets squashed. That's the doomsday scenario you need to wish for.

Anyway, I'm only a few years away from an Air Force defined pension that is not what it used to be, but is there. I've maximized every penny with the B-plan, and I honestly didn't even listen to the A plan defined pension briefing in the new hire brief. I can't imagine anybody actually counting on that.

 

[michael707767]

I've maximized every penny with the B-plan, and I honestly didn't even listen to the A plan defined pension briefing in the new hire brief. I can't imagine anybody actually counting on that.

Before I was hired by Delta I flew for ValuJet. It was a great learning experience, listening to all the ex-Eastern types tell me about the great retirement they never got to see. They all told me the same thing......plan your life like that retirment will not be there. Fortunately, I listened. My wife and I have maximized our 401ks, IRA's, etc, in addition to our own savings. I have never counted on the A plan. Turns out, those guys gave me the best advice I heard.

 

[Boeingman]

B-man, I know all about the Eastern situation and I know the PBGC will be a creditor if there is a liquidation. However, the PBGC cannot force a liquidation. I wanted to see if G4G5 could admit he was wrong, and he can't. I take your dire predictions with a big grain of salt since you have missed your doomsday prediction time after time. I will give you credit for recognizing the pension issue was going to be the major problem way before most others.

For those hoping for the liquidation, let me help you out and point you in the right direction. It is not going to be the PBGC seizing assests. The pensions are gone one way or another, and the UAL ALPA MEC is at least smart enough to try and face that reality out of court. However, none of the other unions will. What I have known all along is what can kill United is United. Start talking United FAs into the CHAOS nonsense when their pension gets squashed. That's the doomsday scenario you need to wish for.

Anyway, I'm only a few years away from an Air Force defined pension that is not what it used to be, but is there. I've maximized every penny with the B-plan, and I honestly didn't even listen to the A plan defined pension briefing in the new hire brief. I can't imagine anybody actually counting on that.

Skykid:

You're right, the PBGC can not just outright force the liquidation of the airline, however the pressure they will exert on the court to cover their financial interest could result in a liquidation. Domino effect. The pension problem and the PBGC is like an out of control frieght train. When the PBGC gets involved the party is over. Sk yourself....why do you think they have moved to terminate the pension? Why would they want the problems? They are doing it to salvage as much as they can now before it is to late. I'm telling you something bad is going down here.


I think my timing has been off, but so far everything I have said will happen to UAL has in fact happened. I am surprised it has gone on as long as it has. My mistake was to believe the creditors would give so much leeway to date. Also, who would have predicted the government would of given money? I was also one of the ones who said you'd never get the ATSB loan as well.

One thing is for sure, the latest sale of Orbitz to stay within the DIP covenants is like burning your furniture to heat the house.

As far as wishing...with a lot of help from Mugs...I came to realize many of the real a$$holes at UAL that were bent on our demise, the ones who constantly told us to shut down "since were dragging the industry" etc. etc. etc are long gone. If only they were around to see the very thing happening to them is painful.

I'm glad to see you're socking money away. I see so many guys relying on these companies for retirement and it is truly a shame.

Best of luck, I do mean it. My words are only meant to get some to think about the real possibiltiy exists this company could tank.

 

[G4G5]

G4G5, I think your logic is way flawed, but you can still keep hoping for a liquidation. Have you noticed all the news analysis that stresses how the PBGC can force liquidation? Me neither. What you have seen is statement after statement where the PBGC estimates how much they will be on the hook for. I'm guesing you work for American. If you do, or if its one of the other airlines with defined pensions. I'd start hoping your wrong.

Lots of talk, for the third time
Why did the PBGC go after the pension of the UAL pilots on 12/29?

"I wanted to see if G4G5 could admit he was wrong, and he can't."
I have always said that the PBGC would sooner force the liquidation of UAL before they took over the pensions. By going on the offensive and attacking only the pilots pension, they are in essence forcing liquidation. I am sorry if you can't see it. I offer direct quotes from the NY Times and the head of the PBGC and all you offer is opinion, yet you have the gaul to tell me I am wrong, start coming up with something other then your opinion.

"I know the PBGC will be a creditor if there is a liquidation."
BINGO!!!!!!!!!!!!Who do you think will get paid first if their is a liquidation?


PS Yes I did fly for AMR, but I also flew for DAL and NWA. Now I am a corporate pilot, with no plans of going back. I no longer have a horse in this race.

 

[G4G5]

Skykid:

Read up on what happened during the Eastern bankruptcy and subsequent liquidation once the PBGC got their hands involved. They were able to step in front of just about every creditor and lay claim on assets to cover the pension underfunding.

There is no doubt in my mind that they smell some serious, posible terminal financial problems to make this move. Much more serious than what is probably being published. They are unlike any other creditor. They carry a lot of clout with the courts and they will get their money one way or another. Usually, as in EAL, they forced the liquidation of assets to cover the underfunding.

They would much rather let the company solve this mess on their own. They wait to a point where they feel the company, as continuing in its present form, will burn through cash or will become insolvent. At that point they make their move to protect their interests. This is exactly what is occuring. You don't think they want this mess to help UAL do you? Think about it.

I have been saying this for a long time, UAL is not going to be able to just walk away from their pensions without a lot of serious pain inflicted on the company.

Ignore history at your own peril. The PBGC is ruthless.

B man,

I could not agree with you more. The PBGC in essence said the exact same thing just last week.

PBGC Executive Director Bradley Belt said the agency is concerned that the agreement could set what he describes as a "dangerous" precedent.

"The company is making generous new pension promises even as it is refusing to honor its old pension promises," he said in a statement.

"We will be scrutinizing this agreement very closely and will take all appropriate steps to protect the financial interests of the pension insurance program," Mr. Belt said.

Appropriate steps? Then an attack on the pilots pension. Humm

Protect the interests of the PBGC? How does this equate to anything less then liquidation? The PBGC will be the first one in line to make sure that they get their $$$$.

 

[G4G5]

Tranceport:
"The PBGC already was facing the required takeover of United pension plans in 2005. By acting at year's end instead of in May, when the pilots' pensions were to have been terminated, the agency said it can avoid the annual increase in mandated benefit payments and save as much as $140 million in additional payouts."

That is why the UAL pilots TA stipulates:

4. Defined Benefit Pension Plan:
• Company will not terminate and will oppose efforts to terminate
prior to the earlier of May 1, 2005 or bankruptcy exit.

From the NY Times:
"In addition, the pilots would have achieved the maximum insurance coverage for their most recent pension increase, which was granted as of April 2000. Whenever a company increases the terms of a pension plan, the government phases in its corresponding insurance coverage over five years to keep troubled companies from promising big increases, then defaulting and leaving the government to pick up the tab. By waiting to terminate the plan until May, United and the pilots hoped to have completed the phase-in period."



<FONT color=#000000>

 

[tranceport]

A better case of mixing apples and oranges with snippets of political, union, mgmt., and newspaper rhetoric could not have been made. Bravo. I can't wait for Boyd's analysis....

For starters, how long has it been since USAIR terminated it's pilot's direct benefit plan? Please provide us with a dollar figure on what the PBGC has gotten from USAIR since that date.

Secondly, you point out that the company (UAL) will oppose efforts to terminate the retirement plan prior to May 1, 2005. So are we reading the same press releases or did my 65 year old mom hand me a statement from the PBGC stating THEY were making the move? (NOT UNITED). I mean G454, I've seen better posts from you but in these last few I'm not following you.

Furthermore, UAL is NOT making a promise for a new defined BENEFIT plan with the new TA (UNLIKE the LTV steel case where LTV distress terminated their defined benefit plan only to offer a new one a couple years later. In this case, UAL is NOT offering a new defined BENEFIT plan- they are offering an additional % to a defined CONTRIBUTION plan....a plan that they are showing they can still make without breaking current minimum cash requirements stipulated by the Creditors and approved by the court)

Additionally, How many runs through the bankruptcy court did TWA take all the while the PBGC was, and still is, paying those poor employees? If you take the time to read about this PBGC institution you will see that when those plans were terminated by TWA a number of years ago, some of these guys and gals that worked their asses off for years are getting $20k a year.

Eastern. How much money did the PBGC get from those scraps way back when? They were an UN-secured creditor. Instead of trying to repeat over and over to SKykid (and others): 'see, see, it's liquidation time' (which is an event that wouldn't surprise us, now would it?), why don't you give non-anectodal evidence to back your claims? It's easy to say things like: 'see, it happened at Eastern' (I'm not saying you said that). This is the kind of talk that is the m/o of union and managment, and thus pilot talking heads.....we fail to dig into the FACTS. Fact is they did not get enough to cover all the pension obligations and nor will they get a sufficient amount from UAL. (they only have a couple bil in cash and few times more that in assets,,,that is why they are in bankruptcy and milking this for all they can)

To make the point that Eastern may have liquidated b/c of PBGC pressure to pay for distress terminated pensions is a stretch. The ceiling is low and UAL may well be headed for a Cat III approach to minimums in the near future but I don't believe a year from now if liquidation happens that the PBGC will be sipping iced tea and saying: 'boy, i'm glad we got all that money to pay these pensions'!? where will they be on the pecking list? Near the BOTTOM, right above the stockholders (who will get ZERO) when liquidation happens. (THAT is why the PBGC was originally founded by the people loving government way back when).


As pilots we're all in this together and this stinks. Why? b/c the amount United has underfunded the pensions this year is a percentage that is very similar at both DAL and AMR (and many other companies). For many on here, the position is: 'who cares and so what. ...pensions are gone anyway.' Well, if that's what we believe, then that's what we deserve. (Thank you ALPA.)

Good luck and Happy New Year.


+++++++++++++++++++++++

The PBGC stipulates that it will take over a pension only under some conditions. here's a copy of that off their site for your own reading:

How a plan terminates

4. When can an employer end a pension plan?

Employers can end a pension plan through a process called “plan termination.” There are two ways an employer can terminate its pension plan.

The employer can end the plan in a standard termination but only after showing PBGC that the plan has enough money to pay all benefits owed to participants. The plan must either purchase an annuity from an insurance company (which will provide you with lifetime benefits when you retire) or, if your plan allows, issue one lump-sum payment that covers your entire benefit. Before purchasing your annuity, your plan administrator must give you an advance notice that identifies the insurance company (or companies) that your employer may select to provide the annuity. PBGC’s guarantee ends when your employer purchases your annuity or gives you the lump-sum payment.

If the plan is not fully funded, the employer may apply for a distress termination if the employer is in financial distress. To do so, however, the employer must prove to a bankruptcy court or to PBGC that the employer cannot remain in business unless the plan is terminated. If the application is granted, PBGC will take over the plan as trustee and pay plan benefits, up to the legal limits, using plan assets and PBGC guarantee funds.


5, When does PBGC terminate a pension plan?

Under certain circumstances, PBGC may take action on its own to end a pension plan. Most terminations initiated by PBGC occur when PBGC determines that plan termination is needed to protect the interests of plan participants or of the PBGC insurance program. PBGC can do so if, for example, a plan does not have enough money to pay benefits currently due