This Could Be Good Or Bad

[ualdriver]

Dizel8 says: The PBGC is indeed to insure pensions, but not to be used as a dumping ground for companies trying to cut cost, which is what UAL is trying to do..........

UAL is not dumping the pension in order to cut costs, nor would they be allowed to do so under the ERISA laws. UAL is "dumping" their pension because it is so underfunded that they will never be able to catch up AND the pensions will not meet the minimum funding requirements required by Federal law. Obviously the laws governing the termination of a pension plan are very complicated, but the above is basically what is happening in a nutshell.

Dizel8 says: "Somehow I fail to see, what the public has to do with this."

The public has everything to do with this. New "low cost" carriers are being rewarded by the public. These low cost carriers do many things in order to be low cost such as not offer their employees pensions, outsource maintenance, pay below market rate salaries/benefits, etc. Now the legacies will have to match those ideals. In order to do so, pay rates will be lowered, pensions will be elimated, and jobs will be outsourced.

UAL tried to "save" the pensions through the ATSB process. The public screamed that they did not want UAL to receive what they perceived as a "government bailout." The public, through their elected and appointed officals, got what they wanted. So now we, as taxpayers, are going to bear the burden of that decision. UAL will probably terminate their pensions per the letter of the law written by our elected officals and their appointees. And if other airlines follow suit in cancelling their pensions, which I imagine they most certainly will if UAL survives as a pensionless major carrier, there will be more repercussions.

Dizel8 says: Of course, UAL does have some very lucrative assets, that can be sold off for top dollar, however, as is understandable from UALs point of view, they are unwilling to do so. Having said that, it does remind you of someone wanting to keep both the Benz and the chalet in Aspen, but not being willing to pay the mortgage on the main house.

Actually, the guy with the Benz and the chalet in Aspen can't sell those assets to fund his retirement if they're already pledged as collateral to pay off credit card debt!

The public has spoken, and the consequences of the public's requirements will follow. The legacies will have to listen or they will go the big place in the sky.

 

[Dizel8]

"UAL tried to "save" the pensions through the ATSB process"

UAL tried to save UAL through the ATSB process. I would venture a guess and say the pension would have ended up on the chopping block regardless. After all the pension is vastly underfunded, since UAL did not continue to adequately make up for the shortfall in stock, to the tune of much more than the ATSB would have ponied up.

So yes, I would still say UAL is dumping the pension on the PBGC, because it is easier than digging itself out of the hole. Yes, the pension is underfunded today, but perhaps that would not be the case 5 years from now. Sure, management would have to be fiscally responsible and not rush out to buy brand new 777s and 7E7s, start Avolars, payoff failed mergers and inept CEO's, but it probably could be done.

In its zest to be the world biggest carrier, UAL chewed off more than it could swallow and now it is time to pay the piper.

Mind you, this is nothing against the employees, they all did their job and continue to do so admirably. Management clearly failed to manage, some would say that is still the case, of course certain events beyond every ones control further exasperated the problem. Although it does seem, that UAL was facing uncertainty as early as 2000.

 

[ualdriver]

Dizel 8 says: UAL tried to save UAL through the ATSB process. I would venture a guess and say the pension would have ended up on the chopping block regardless. After all the pension is vastly underfunded, since UAL did not continue to adequately make up for the shortfall in stock, to the tune of much more than the ATSB would have ponied up.

Yes UAL did try to save UAL through the ATSB process. The business plan submitted to the ATSB included funds to shore up the pensions. However, I agree with you that ATSB guarantee or not, long term the pensions would be lost. It just would have been during the next financial crisis instead of this one.


Dizel 8 says: So yes, I would still say UAL is dumping the pension on the PBGC, because it is easier than digging itself out of the hole. Yes, the pension is underfunded today, but perhaps that would not be the case 5 years from now.

That's true. Perhaps 5 years from now it wouldn't be underfunded. However, in order to meet ERISA and PBGC requirements NOW, the money that we have to contribute NOW to make up for years of poor market returns and historically low interest rates would be too much of a burden. Without the ATSB guarantee, no bank is going to give us a pile of money that basically will go straight to the pension funds. So here we are. Customers want cheap tickets, and UAL is going to do everything within their power to give them to its customers.


Sure, management would have to be fiscally responsible and not rush out to buy brand new 777s and 7E7s, start Avolars, payoff failed mergers and inept CEO's, but it probably could be done. In its zest to be the world biggest carrier, UAL chewed off more than it could swallow and now it is time to pay the piper.

You're preaching to the choir Dizel8. Hindsight is 20/20 and here we. Me and my co-workers will be without a pension soon and my Captain paycheck now reflects the bar set by the low cost carriers. And I suspect another round of paycuts to come in the up and coming months before we exit bankruptcy, if we do. Let the downward spiral begin.

Although it does seem, that UAL was facing uncertainty as early as 2000.

I agree. It probably started around that time and was just rushed by the events of September 11th and the rapid proliferation of low fare carriers. I think it's pretty clear that either now or down the road, the legacy carriers would be in trouble as the Southwests and Jet Blues of the world slowly eroded market share and yields as they grew.

 

[markkus757]

What people fail to see is that there are two ways to set up a pension. All of the ones failing right now are the wrong way of course. You ask the teamsters if any of their personal pensions are undefunded, they're not. What you put in is what you get out, not the Wimpy "i'll take now and gladly pay you later" crap. Hell, if anyone's surprised, read up on how underfunded Social Security is right now. If your less than 50 years old, don't plan on it being around to help you at retirement. :down:

 

[Dizel8]

"If your less than 50 years old, don't plan on it being around to help you at retirement".

No, but at least us under 50 get to pay for it, so we got that going for us, which is nice

Of course, the PBGC is also worried about funding, so perhaps we can get to pay for that too, through higher taxes, which would be even nicer.

 

[rotate]

A pension bailout will come at a cost. First cost will be that those now working will get a substantial reduction in their benefit, the second cost could be the company itself. Anyone, that thinks the Fed's will gladly pay benefits to retired employee's and future retirements needs to reconsider. There is a lot at stake here. I for one think that Ual needs to look at a way of paying into the fund. It's funny how Tilton still gets his. What a jerk.

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And you would have given up $4.5 millon of your own money for the "honor" of saving UA from itself, uafa21? What are you willing to concede? Tilton was guaranteed that money from his 30 years at Texaco. His retirement has NOTHING to do with United. I'd love to see some of you whiney SOBs voluntarily give up something you're guaranteed.

Stop being so judgemental. You don't want to give up your retirement and neither does Tilton. Difference is, he didn't have to join this ridiculous cesspool the rest of us live in. He could have retired from Texaco with all those millions and avoided the whole damned mess and agrivation. Frankly, I don't know why he took this s--t on. I would have taken the money and retired. h34r: