U
UAL_TECH
Guest
Negotiation notes
Rosemont, Illinois
December 30, 2004 2230
The final negotiation session of this year started with a bang. The page two legal notice in today’s USA Today immediately drew the Negotiating Committee’s (NC) attention. The notice states that the Pension Benefit Guaranty Corporation “has determined under provisions of the Employee Retirement Income Security Act of 1974 (ERISA) that the above pension plan [the UAL pilot defined benefit pension plan] must terminate and that the PBGC should become statutory trustee of the pension plan.†This notice announced the “involuntary distress termination†of the UAL pilot’s defined benefit pension plan.
The USA Today PBGC legal notice abruptly terminated the pilot’s defined benefit pension plan. Either the company or the PBGC may terminate a pension plan. If the company terminates then it is characterized as “voluntary distress termination.†When a company terminates a pension plan it must give a 60 day notice of termination. The PBGC action today, however, takes effect immediately.
An involuntary distress pension termination and its immediate effective date brings up an important consideration for our members. The PBGC does not include a level income option as one of its distribution options. Our current UAL defined benefit plan, however, does feature a level income option.
The election of a distribution option at retirement is a highly personal choice. Every potential retiree must carefully consider his/her circumstance. Pension actuaries often counsel all distribution options as financially equal; it’s the fit that matters. AMFA members that may retire soon and are considering the level income option must now consider the risk to that selection. An involuntary distress termination (no 60-day notice) by the PBGC of our pension plan would foreclose that choice.
The PBGC, however, does not seem likely at this time to terminate the UAL ground employees pension. The press release posted on its website offered some assurance as to the continuing existence of our plan. Bradley Belt, PBGC Executive Director, said, “in conjunction with the company’s bankruptcy proceeding, PBGC’s financial advisers have come to the conclusion that United Airlines can afford at most only three of its pension plans.†The press release also noted, “The termination of the pilots plan also gives the company a greater financial capacity to maintain the remaining plans.†This situation remains fluid and will continue to present certain risks to all vested members. Read the full press release at the PBGC web site: http://www.pbgc.gov/news/press_releases/2004/pr05_18.htm.
At the 0800 union caucus the NC discussed and debated the items to include on the modified offer it was preparing to give the company. The debate moved around the table as each NC offered his position. The NC all understood that we’re not in Section 6 negotiations. The 1113 process forced the NC into this position to consider a series of proposed concessions by the company. They only had two choices: evil and lesser evil. No one wanted the imposition of the company term sheet by the court. They were under duress to choose the “best of the worst.†The company arrived shortly after noon to receive the NC’s current offer.
Main points of AMFA’s modified offer:
· Reduce base wages by 5.25% with 1.5% annual increases each January 1
from 2006-2009.
· Delay 5/05 premium (license and skill pay) increase to 1/06
(the 1.5% increases apply to base and premium pay).
· Reduce Success Sharing by 75% and receive $21 million credit.
· Reduce holidays from 10 to 6.
· Outsource fuelers and receive full $12 million credit.
· 747/777 HMV/OSV offshore with Article II-F waiver till 12-31-09
· Withdraw narrow body offshore HMV/OSV
· Annual 3% base wage increase starting June 15, 2010 until new CBA is
ratified.
· C-checks kept in-house.
· Components, avionics, engines, and landing gear will not go offshore.
· AMFA entitled to proportional value convertible note program like ALPA
tentative agreement if program passes legal and regulatory review.
· If SAM (salaried and management) employees receive raises greater than
the SAM term sheet then AMFA members will receive equivalent raise.
· AMFA members receive semi-annual payments linked to improvements in
fuel costs and revenue. Methodology to be mutually determined.
Al Koehler, chief company negotiator, acknowledged the difficulty the NC faces in its attempt to bring back these painful terms.
As the afternoon progressed the NC decided to gather more information from various sources regarding the PBGC action today. It placed calls to Marion Durkin, VP Deputy General Counsel, Pete Kain, VP Labor Relations, and Steve White, AMFA pension actuary with Milliman USA. The NC sought to understand the context of the pilot pension termination including the possible effects on our effort to protect our pension and conclude an 1113 agreement.
In a speakerphone conversation with the NC, Steve White offered some immediate observations. By terminating the pilot’s plan today, the PBGC saved an additional 2.8% liability. The monthly maximum benefit cap increases every year to account for inflation. Terminating today saved the PBGC the 2.8% increase scheduled to take effect 1-1-05. In addition, according to an AP dispatch, the PBGC can “save as much as $140 million in additional payouts.†Steve observed that the group most hurt by the PBGC’s action today is the retired pilots.
He also noted that the PBGC could prevent our group from gaining an increase in benefits if our plan terminates before March 14, 2005. The PBGC phases in all plan increases over a five-year period at the rate of 20% per year. It remains uncertain at this point whether the effective date (July 12, 2000) or the signing date (March 14, 2002) will be used for calculating the amount of our last increase ($26.96) that we will be allowed if the PBGC terminates our plan.
The NC along with the company negotiators conducted a conference call with Marion Durkin and Pete Kain. Due to confidential information being discussed the observers were asked to leave the room. I was told afterwards by NC member Malik Miah that the NC sought more information on the meaning of the PBGC action. He added that Ms. Durkin and Mr. Kain did not offer any new information. They had not yet spoken to the pilot group.
Delle made clear to Mr. Koehler that the NC was prepared to stay all weekend, if necessary, in order to reach a consensual agreement. The company later responded that they needed more time to consider the offer. The company and the NC will meet again Tuesday, January 4, 2005. The bankruptcy court hearing that consider the motions to terminate the existing contracts are scheduled to begin January 7.
B) UT
