My view on Senate hearing on US Airways pension problem

[chipmunn]

If the PBGC and US do not come to a resolution to spread out pension plan restoration payments, US would become a stronger competitor because it would have a stronger balance sheet, which would not help the competition.

Chip

 

[oldiebutgoody]

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On 1/15/2003 3:30:23 PM LGA Fleet Service wrote:

[FONT size=1]Anyone care to wager on when General Motors stands up and says they need relief from their 30 billion dollar pension gap?

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I'll bet you hear it real soon, no matter what happens at U. Not only that, I would also bet that GM gets exactly what it asks for, even if U is forced to liquidate it's pensions. The government may wind up with an entire department dedicated to the administration of PBGC pensions. Like a HUGE version of Social Security, if it forces liquidation of all these retirement plans without allowing for some creative restructuring.

 

[MrAeroMan]

[P]
[BLOCKQUOTE][BR]----------------[BR]On 1/15/2003 359 PM oldiebutgoody wrote:
[P]
[BLOCKQUOTE]The government may wind up with an entire department dedicated to the administration of PBGC pensions. Like a HUGE version of Social Security, if it forces liquidation of all these retirement plans without allowing for some creative restructuring. [/BLOCKQUOTE]
[P][/P]----------------[/BLOCKQUOTE]
[P]Those in government thrive on situations just like this. Anything to create a huge bureaucracy to keep them in a job and therefore feeling important and indespensable. You can bet your bottom dollar forces at AA, DL, NW, CO are lobbying to not let this happen. AA was and is a huge contributor to Bush as is CO. Ask yourself where are they located?? Well, Texas of course....imagine that!! This whole situation stinks worse than a dozen eggs in an old shoe sitting on the ramp at DFW for a week in August. [BR]You can't blame the pilots for being angry about possibly losing their pension and the CSS and RSS people reminding us that they've gone down this road in the early '90's without nearly as much fanfare. While it stinks for the pilots to lose that much I know a lot of CSS and RSS people that would jump for the moon to be pulling in $40K plus in a pension. [/P]

 

[chipmunn]

In an interview with Pittsburgh TV Station KDKA Senator Arlen Specter said he "thinks he has a strong case to save the (defined benefit plan) and he thinks we will win." The senator continued it would likely come down to the wire like the Pittsburgh - Tennessee game.

Two more weeks to go...we'll see...

Chip

 

[oldiebutgoody]

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On 1/15/2003 3:54:11 PM RowUnderDCA wrote:

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On 1/15/2003 137 PM ual06 wrote:

I am lost on this thing. As I understand, if the plan is put into a "distress termination", the PBGC will take all assets of the plan and guarantee a retirement of about 25%, of original expectations, to each pilot participant. I cannot imagine that the plan is only 25% funded.


It is beginning to appear that the assets of the plan is looking like a ripe fruit on the vine, ready to be picked and mostly consumed by Uncle Sam.
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[/blockquote]

I'm guessing that you're right that if the PBGC 'takes over' any pension plan, then the PBGC takes both the risk that the plan will shrink in value, as well as possibly increase in value?

I could see how this would be a very difficult pill to swallow, if true. So, if the PBGC 'takes over' any of US's pensions, will the PBGC be obligated to adhere to the payout terms UP TO a maximum payout, regardless of the financial returns of the investments? If this is true than some of the plans that the PBGC takes over might be a net positive for the PBGC, right? Taking plans and immediately reducing their payout to the PBGC maximum would be a windfall for the PBGC, most likely, right? Surely, the PBGC doesn't have the same time horizon that US has... they can wait for the investments to come back, right?

I think that I understand that it is illegal for U to adjust downward pension benefits already accrued.... so then the $3.1 billion underfunding can't be affected by much more than improved financial performance, or (not to be too macabre) undercollection of benefits.

Boy, that does seem harsh. But all risk pools require some to pay more and others to pay less. I think that PBGC is protecting their 'pool'... hmm?

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I believe that you are right, except that the funds already acrued are used to make groups of employees "whole" (that is, while funds remain). It is my understanding that this virtually wipes out the accrued funds, leaving the government a huge debt to pay when the remaining employees retire. Seems to me the best way for them to protect their position is to allow U to continue funding the pensions in a way which protects the investment. Allowing (or, forcing, if you prefer) the funds to liquidate just lets management off the hook. Why do you think they are rushing this issue. They would love nothing more than to be relieved of this continuing burden. Also, U would continue to have to service this accrued burden way into the future. Those that think that this is purely a U pilot issue are terribly wrong. It has a whole lot more to do with how much of a financial burden is going to be shuffled off to the taxpayers from ALL industries with Defined Benefit Retirement Plans. U is small potatoes compared to companies like GM, Ford, Boeing, and others, who could be looking to get out of the pension business by "dumping" them on the government. The only winners if U's pension funds are liquidated are U management and the RSA, since it reduces the companies costs of operations even lower than they already are.

 

[Biffeman]

Once the pension reaches 70% funding level the PBGC has to step in and distress terminate a pension, say bye bye to the million dollars lump sum payment or the $150,000 a year pension and day hello to $43,000 a year.

 

[MrAeroMan]

[blockquote]
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On 1/15/2003 506 PM chipmunn wrote:

If the PBGC and US do not come to a resolution to spread out pension plan restoration payments, US would become a stronger competitor because it would have a stronger balance sheet, which would not help the competition.

Chip
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[/blockquote]
So you think the competition is lining up behind U on this one? Not!

 

[Bob Owens]

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On 1/15/2003 2:07:36 PM diogenes wrote:

I must say the picture of alpha male, Type A, ALPA types going, hat in hand, to a Republican, 'let them eat cake' Congress for a bailout to be ironic.

Should be interesting.

Cynicism cannot keep pace with the headlines.


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Why? For the most part they are going to one of thier own.

 

[us10]

[blockquote]
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On 1/15/2003 506 PM chipmunn wrote:

If the PBGC and US do not come to a resolution to spread out pension plan restoration payments, US would become a stronger competitor because it would have a stronger balance sheet, which would not help the competition.

Chip
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[/blockquote]
"By pursuing this alternative, the Company would absolve itself of its obligations to the pilots’ pension plan and turn it over to the PBGC upon termination. The Company would then seek to construct a defined contribution plan using the funding available in its ATSB business plan. While the economics may be matched for the Company, it will not be matched for pilots."


Chip,

The company is going to spend 300 million per year for the next seven years on these pensions.Either a 30 year PBGC refunding program or a defined contribution plan as described above will require the full 300 million a year.I'm not sure I see the competitive advantage with the same cash out flow either way.

 

[cubfan02us]

I find it interesting that just after all of the second
round of concessions were ratified that the pension issue
looms so quickly as the next big hurdle for US Air. I'm
sure it was part of the timeline but it's looks like
Siegel bushwacked the pilot's on this one.Call it what
it is...a cheap shot...
I hope that the politicians and the
pilots can save this one. Despite USAir's managements
questionable behavior,it's almost as if they [mgt],slipped
back in time and took a page out of Lorenzo's book of
Airline management.

 

[usfliboi]

What is so "knee slappin" funny is this company and its "INVESTOR" will think they have sucessfully muted the unions, ie won the battle! I submit that this yet again will translate into to a company with disgruntled non trusting bitter employees. Its so sad that it all came to this! Ill also have to say its funny how chip seems to be a little , should i say nervous about this one! Hang in there Chip Dave has your best interest at heart

 

[LGA Fleet Service]

[BR][BR]
[BLOCKQUOTE][BR]----------------[BR]On 1/15/2003 506 PM chipmunn wrote: [BR][BR]If the PBGC and US do not come to a resolution to spread out pension plan restoration payments, US would become a stronger competitor because it would have a stronger balance sheet, which would not help the competition.[BR][BR]Chip[BR] [BR]----------------[/BLOCKQUOTE][BR][BR][FONT size=1] What is to stop the Senators from GA,MN,TX and IL from seeking [BR] relief for their constituent airlines? [BR][BR] Good for the Goose and all that...[BR][BR] [/FONT]

 

[pitguy]

Sounds like the government and the company will say "we did all we can do, sorry". It is a pipe dream to believe there will be a bail out coming for the pensions. But at least we will all have a job and some of us will just have to give a little more. No pain no gain.

 

[savyinvestor]

Chip, You fail to take into account that U deserves no special consideration. We could probably fill this entire page with a list of companies with underfunded pensions. An exception for U will create a stampede from all the others looking for the same treatment. Then what? Take off your blinders.

 

[oldiebutgoody]

[BR][BR]
[BLOCKQUOTE][BR]----------------[BR]On 1/15/2003 7:54:12 PM savyinvestor wrote: [BR][BR]Chip, You fail to take into account that U deserves no special consideration. We could probably fill this entire page with a list of companies with underfunded pensions. An exception for U will create a stampede from all the others looking for the same treatment. Then what? Take off your blinders.----------------[/BLOCKQUOTE][BR][BR]I'm not Chip, but[BR]What's wrong with new rules allowing companies to retain their responsibility to fund the pensions, rather than dump them on the taxpayers? By the way, this has been done before, and with very good results. What you are advocating is allowing companies to shed fiscal responsiblities onto the government, eventually to be paid by all taxpayers. The only other option is a liquidation of U, and if that's what you are advocating I'll tell you, that won't do anything but put more burden on the government, and not just in pensions. What think they're gonna do, make ALL the companies that are underfunded liquidate? [BR][BR][FONT size=3]You need to get a grip and look at what you are saying. It doesn't make any sense from any angle![/FONT]