Pensions...new Turn In The Road

[fix_airplanes]

Pension help for US airlines proposed

Friday April 22, 2005

Legislation to give US airlines more time to make payments to underfunded employee pension plans was proposed by US Sens. Johnny Isakson (R-Ga.) and John Rockefeller IV (D-W.Va.) earlier this week.

The Employee Pension Preservation Act of 2005 would allow carriers to spread their deferred pension funding obligations over 25 years instead of the current four years.

In return, unions would have to agree to freeze their benefits at the current level.

The bill also limits the liability of the US Pension Benefit Guaranty Corp., which may have to seek a federal bailout if more airlines terminate their pension plans in bankruptcy, as United Airlines has said it will do.

In a statement, Air Line Pilots Assn. President Duane Woerth said the proposed legislation "comes not a minute too soon." :angry:

 

[North by Northwest]

"UAL will now have significantly lower costs, which will give it an advantage over rivals such as Continental Airlines (CAL:NYSE - news - research), Delta Air Lines (DAL:NYSE - news - research) and Northwest Airlines (NWAC:Nasdaq - news - research), which have underfunded pension plans. " That advantage won't last for long. The government will most definately grant pension relief now. Otheriwise, you will see the PBGC collapse..when all the other carriers join BK to shed their pensions and debts. This is where the changes are going to get interesting.

 

[Dizel8]

But even changing the funding period may not be enough for management, they might just want it all, iow get rid of the pension all together.

UAL and U has slashed pay, benefits, working condition and the pension, this has a real potential of being a serious burden to the few well paying carriers left, that competes with UAL and U.

 

[aafsc]

But even changing the funding period may not be enough for management, they might just want it all, iow get rid of the pension all together.

UAL and U has slashed pay, benefits, working condition and the pension, this has a real potential of being a serious burden to the few well paying carriers left, that competes with UAL and U.

[post="264023"][/post]​

IF AA,NW,CO, and DL managements can freeze the plans and they accrue no more benefits and then have 25 years to pay off the underfunding (along with rising interest rates and a recovering stock market) then that is what I think they will do.

 

[fix_airplanes]

Except at current decline of the legacy airlines $$ health....some will not be around for this 25 year "deffered" payment anyway.

And that is where PBGC "traditionaly" comes in. This new proposed legislation has some "grey/fuzzy" language about "limiting" the PBGC's liabilites regarding airline pension default.

The devil is in the details.