Financial Analysis

[chipmunn]

OldPropGuy:

I guess I wasn't clear. You're right the company could seek to have the PBGC terminate all pension plans; however, I understand the company could use this tactic as a last resort for any union who does not participate in the new round of concessions.

I cannot speak for the other unions, but ALPA and the company are addressing the pilots pension plan, that is independent from the other labor groups, and I believe the parties will reach an acceptable accord with the PBGC.

I do not believe the company wants to use the pension termination "hammer", but it is a tool that is available for all labor groups.

In addition, with the pilots having 70 percent of the corporate obligation, the pilots have the most to lose and that is why ALPA will reach an agreement to save this benefit.

Chip

 

[diogenes]

Just to get the facts right.

Each work group has a separate pension plan. ALPA has theirs, AFA ditto, CWA same, IAM fleet has a separate plan from IAM mech. TWU has their own deal. What happens at one plan does not necessarily affect the others. Case in point, when the agents' plans were frozen, and converted to 401k's, there was no effect on ALPA, AFA or IAM-M's plans.

ALPA, AFA and IAM mech have defined benefit retirement plans (DBRP). CWA and TWU have defined contribution retirement plans (DCRP), aka 401k's. IAM fleet had the same deal as CWA and TWU until the last round of concessions. The IAM fleet plan was converted to the IAM pension fund, which is a multi-employer fund. The way this fund works is all employers, and there are thousands that participate in this plan, pay a negotiated, fixed amount into the plan per employee. The risk of investing that money falls on the IAM pension fund, not the employer. If the plan struggles, risk will shift to the employees, not the employer.

The main difference between DCRP's and DBRP's is where the risk falls. In a DBRP, such as ALPA,AFA and IAM-M have, the company guarantees the benefit to the employee, thus assuming the risk of investing the plan's funds. In a DCRP, such as CWA and TWU, the company guarantees the contribution to each employee, and the employee assumes the risk of investing the plan's funds.

Obviously, the DCRP's are much cheaper for the company, and this is why U forced it unilaterally on the agents 12 years ago - also setting the stage for organization drives.

Another key difference between DCRP's and DBRP's. The government agency that guarantees pensions, the Pension Benefit Guarranty Corporation, will back DBRP's. They do NOT guarantee DCRP's.

This is all the backdrop for the current ruckus over pensions. CWA, IAM fleet, and TWU don't give a damn if the PBGC takes over the plans, because it will have no effect on us - our plans are outside PBGC jurisdiction. And just as no one outside these groups shed a tear when our DBRP's were frozen, expect no one in these groups to get too upset if other DBRP's get frozen now.

AFA and IAM-M are less sanguine, but can live with it. If PBGC takes over, the plan is effectively frozen for them, but they don't lose what they've accrued. And the PBGC retirement cap is in the ballpark of what the employees expected to get, anyway.

ALPA is rightfully sh**ttin' kittens. PBGC's maximum benefit is about $45,000 annually - way, way below what a pilot expects to retire with. And as much as I like to kick ALPA around, I wouldn't wish this on them. I expect them to do some SERIOUS maneuvering to avoid PBGC. Where I draw the line is when ALPA wants to stand me out in front of the firing squad. Sorry guys, I took the bullet, pension-wise, a decade ago. Solve your pension problem in-house, not on my back. May I suggest a play such as IAM - fleet worked out? Is there a multi-employer plan ALPA has access to? It's not quite as good as a DBRP (although with practically all of the DBRP's at most major corporations now underfunded, that's debatable) but it's a damsite better than 401k's. If not, I'd bet huge money the IAM pension fund would let you in.

And in closing, and on a personal note, I think 401k's are a bad idea for the average front line grunt. What do we know from investing? If I wanted to be a bean counter, I'd have done that 20 years ago.

 

[ExitPointer]

[blockquote]
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On 12/6/2002 4:00:29 PM diogenes wrote:



And in closing, and on a personal note, I think 401k's are a bad idea for the average front line grunt. What do we know from investing? If I wanted to be a bean counter, I'd have done that 20 years ago.



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[/blockquote]

Excellent post, Diogenes!

 

[oldiebutgoody]

You guys talk like your gonna get a say in this. I seriously doubt it.

 

[diogenes]

EP and MLT,

Thank you for the kind words. I often post my opinions, but the last was a 'just the facts, ma'am' kind of deal. I hope I always make clear the distinction.

Again, gracias.

Dio

 

[ForkTime2002]

If they do not comply, Mr. Bronner said in the interview, the airline would go out of business and be liquidated in bankruptcy court. "What's their alternative?" he asked rhetorically. "If they don't want to do this, we'll Chapter 7 it."

 

[OldGuyinPA]

Mr. Bronner will do what makes sense for him. He needs to cut his loses in USAIR...ways. Now we need to do the same thing for ourselves. When do we say enough is enough. If I wanted WalMart wages...I'd be handing out those smiley faces.

I'm not sure Spring will be an option for us.....