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Judge: U.S. Air Can End Pension Plan
Sunday March 2, 1:35 am ET
By John Crawley
ALEXANDRIA, Va. (Reuters) - A federal judge ruled on Saturday night that US Airways Group Inc. (OTC BB:UAWGQ.OB - News) could terminate its pilots'' pension plan, saying it was a disheartening option to help save the bankrupt carrier.
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Judge Stephen Mitchell of the U.S. Bankruptcy Court for the Eastern District of Virginia cleared the way for the company to seek federal government approval of its proposal to replace the pension plan with a cheaper one.
The pension plan covers 3,600 active and 1,100 retired pilots, some of whom could lose up to 75 percent of their benefits under the proposal.
US Airways says it can no longer afford the pilots'' retirement plan and wants to replace it with one that would offer $850 million over seven years. The carrier says resolving the $1.6 billion pension liability is the last major hurdle it faces in Chapter 11 reorganization.
The company has said resolving the pension question is also necessary to receive $200 million in emergency financing from its biggest investor, Retirement Systems of Alabama, and a $1 billion government-backed loan.
The union had said the company did not use accurate financial calculations or consider every alternative to ending the plan. Mitchell disagreed, saying the company took reasonable action in the face of severe financial distress.
It is disheartening that I am called upon to make a ruling on this motion. Some pilots may get something close to what they would have gotten. Others will suffer a great deal, Mitchell said.
IMMEDIATE TALKS SOUGHT
This is not a happy case. When it comes to distributions and outcome, pensioners will get more than any other creditors, said John Butler, the lead bankruptcy attorney for the airline.
The company hopes to emerge from bankruptcy protection by the end of the month.
Mitchell said the airline must still resolve questions about whether the pension change would violate the pilots'' contract. The pilots contend that any change must be part of collective bargaining.
US Airways called for immediate negotiations with the Air Line Pilots Association (News - Websites) to address the contract dispute, which is the subject of a grievance hearing before the National Mediation Board on March 13.
We regret the impact that the plan termination will have on our pilots but the ultimate goal must be to save this airline and the jobs of almost 35,000 dedicated employees, said David Siegel, US Airways president and chief executive officer. We believe we can find a mutually achieved solution to implement a new pension plan.
Roy Freundlich, the pilots'' union spokesman, said the labor group would explore all its legal options and alternatives under its contract with the airline.
This is not over, he said.
Any new plan would only cover active pilots, while retirees would have to accept whatever level of benefits are approved by the Pension Benefit Guarantee Corp., the agency that oversees corporate pensions.
Judge: U.S. Air Can End Pension Plan
Sunday March 2, 1:35 am ET
By John Crawley
ALEXANDRIA, Va. (Reuters) - A federal judge ruled on Saturday night that US Airways Group Inc. (OTC BB:UAWGQ.OB - News) could terminate its pilots'' pension plan, saying it was a disheartening option to help save the bankrupt carrier.
ADVERTISEMENT
Judge Stephen Mitchell of the U.S. Bankruptcy Court for the Eastern District of Virginia cleared the way for the company to seek federal government approval of its proposal to replace the pension plan with a cheaper one.
The pension plan covers 3,600 active and 1,100 retired pilots, some of whom could lose up to 75 percent of their benefits under the proposal.
US Airways says it can no longer afford the pilots'' retirement plan and wants to replace it with one that would offer $850 million over seven years. The carrier says resolving the $1.6 billion pension liability is the last major hurdle it faces in Chapter 11 reorganization.
The company has said resolving the pension question is also necessary to receive $200 million in emergency financing from its biggest investor, Retirement Systems of Alabama, and a $1 billion government-backed loan.
The union had said the company did not use accurate financial calculations or consider every alternative to ending the plan. Mitchell disagreed, saying the company took reasonable action in the face of severe financial distress.
It is disheartening that I am called upon to make a ruling on this motion. Some pilots may get something close to what they would have gotten. Others will suffer a great deal, Mitchell said.
IMMEDIATE TALKS SOUGHT
This is not a happy case. When it comes to distributions and outcome, pensioners will get more than any other creditors, said John Butler, the lead bankruptcy attorney for the airline.
The company hopes to emerge from bankruptcy protection by the end of the month.
Mitchell said the airline must still resolve questions about whether the pension change would violate the pilots'' contract. The pilots contend that any change must be part of collective bargaining.
US Airways called for immediate negotiations with the Air Line Pilots Association (News - Websites) to address the contract dispute, which is the subject of a grievance hearing before the National Mediation Board on March 13.
We regret the impact that the plan termination will have on our pilots but the ultimate goal must be to save this airline and the jobs of almost 35,000 dedicated employees, said David Siegel, US Airways president and chief executive officer. We believe we can find a mutually achieved solution to implement a new pension plan.
Roy Freundlich, the pilots'' union spokesman, said the labor group would explore all its legal options and alternatives under its contract with the airline.
This is not over, he said.
Any new plan would only cover active pilots, while retirees would have to accept whatever level of benefits are approved by the Pension Benefit Guarantee Corp., the agency that oversees corporate pensions.
