Bailout Feared If Airlines Shed Their Pensions

[us0004us]

http://www.nytimes.com/2004/08/01/business...pagewanted=1&hp

“The agency can’t take a lot of $5 billion hits, multiple times per year, year after year, and survive,â€￾ said Steven A. Kandarian, the pension agency’s immediate past director. “Eventually, you’ll run out of money.â€￾

It is impossible to predict the exact size of any pension bailout, although economic projections by the agency suggest that in the worst case, a bailout within the next decade involving failures beyond the airlines could cost taxpayers up to $110 billion.

But because pension obligations, unlike bank deposits, do not have to be paid off all at once, it is difficult to raise alarms about the threat.

 

[jimntx]

The real problem is that the PBGC was created to protect the pensions of employees when the company went out of business--such as, the NCR shutdown.
This business of dumping pensions on the government to make up for bad past business decisions is a new and dangerous practice that the PBGC should never have allowed to start. From now on, any company with a DB plan will decide that in lieu of taking responsibility for bad fiscal decisions they can just blame the pension plan for their financial problems.

 

[diogenes]

The government paying for poor decisions?

I thought this Administration was opposed to that sort of thing!

 

[javaboy]

i noticed that UAIR pilots pensions werent mentioned, but now UAL is in dire straights its front page news ?

and that the UAIR pilot pension at time of termination was 70% funded. and had it been canceled prior to BK the participants would have recieved 70% of what they were owed, instead the assets went to the PBGC and now they will receive much less than if the plan was simply terminated by mutal agreement before the judge wiped it out.

and lets not forget those DAL pilots leaving in massive numbers and taking thier lump sums thinking that i got mine i;m gone seem to have forgotten that the company in BK can go back 24 months and take that money back .... man are they in for a shock.

 

[Winglet]

This whole pension failure reminds me of the Savings and Loan scam in the 80s when billions of dollars went into the pockets of fat cat executives and their friends and the taxpayers got stuck for the bill. Most of those crooked execs are probably still grinning ear to ear on the money they still have from that.

 

[Dilligas]

and lets not forget those DAL pilots leaving in massive numbers and taking thier lump sums thinking that i got mine i;m gone seem to have forgotten that the company in BK can go back 24 months and take that money back .... man are they in for a shock.

Well,

If they take it in a lump sum, and they've earned it and are entitled to it contracturally, how do you suppose Delta can make them "give it back"?

Isn't that the premise behind taking a lump sum, get it and go?

 

[javaboy]

its called fairness of payment in bankrupcty and is allowed. just ask the UAIR pilots that had this happened to.

shocking isnt it.

then picture as soon as this happened, Siegel got his lump sum and left...

thus continuing the US/Them mentallity and mgmt wonders why nobody trusts them?

ask AMR folks who were on the brink of bankrucptcy found out that top executives had a secret funding of thier pensions that would secure them in the event of a bankrupcty filing once this was made public Don Carty was forced to resign.

 

[javaboy]

Just sent to NYT in response to the article published.....
with reguards to your article: below is the link and 2 sections (response in CAPS to differentiate)

Bailout Feared if Airlines Shed Their Pensions

http://www.nytimes.com/2004/08/01/business/01PENS.html?hp

Now experts say they see similar forces gathering in the pension sector, with United Airlines perhaps the first to go down the path. Operating in bankruptcy, United is striving to attract the lenders and investors it needs to survive. It said last month that it would no longer contribute to its pension plans; United also seems intent on shedding some or all of its $13 billion in pension obligations as the only way to succeed in emerging from bankruptcy proceedings

ACUTALLY USAIRWAYS ALREADY WENT INTO AND OUT OF BANKRUPCTY AND SHED ITS PILOT PENSIONS EVEN THOUGH THE PLAN AT THE TIME WAS 70% FUNDED AND HAD IT MERELY BEEN TERMINATED AND ASSETS DISTRIBUTED TO ITS PARTICIPANTS (PILOTS) THEY WOULD HAVE RECIEVED ON AVERAGE BETTER THAN 60% OF WHAT THEY WERE OWED. INSTEAD IT WILL BE MORE LIKE 20% FROM THE PBGC WHICH TOOK OVER THE PLAN AND THUS TOOK THE ASSETS AS WELL.

Already, some airline employees are taking steps to protect themselves against future pension losses.

Each month, for example, about 30 pilots normally retire from Delta Air Lines. But in June, almost 300 did.

AGAIN REFERRING TO THE USAIRWAYS PLAN TERMINATION, THE COMPANY STILL RESERVES THE ABILITY (IN BANKRUPCTY COURT) TO GO BACK 24 MONTHS AND YES TAKE BACK ANY LUMP SUM PAYMENTS. I DO NOT BELIEVE THE DELTA PILOTS ARE EVEN AWARE OF THIS.

AS A SIDE NOTE THE USAIR PILOTS TOOK 25% WAGE CUTS (TO PREVENT BANKRUPCTY) AND THEN IN BANKRUPCTY ANOTHER 15% WAGE CUTS TO AVOID TERMINATION OF THE PENSION PLAN WHICH AFTER AGREEING TO THAT THE PLAN WAS PROMPTLY CANCELED. AFTER 14MONTHS OF EMPLOYMENT CEO DAVID SIEGEL WAS AWARDED OVER 5.0 MILLION IN A LUMP SUM AS WELL AS A LIFETIME PENSION TO LEAVE WHILE 30 YEAR PLUS VETERANS OF THE COMPANY GOT NOTHING.

DURING THIS SAME TIME IT WAS MADE PUBLIC THAT AMR OFFICIALS HAD SECERETLY FUNDED THEIR OWN PENSIONS SHOULD THE COMPANY BE FORCED INTO BANKRUPTCY, ONCE PUBLIC COST THEN CEO DON CARTY HIS JOB.