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US Airways'' fate rests in arbitrator''s hands
PITTSBURGH (Tribune-Review) - A bankruptcy judge''s conditional approval for US Airways to terminate its pilots pension plan leaves much of the airline''s prospects for recovery in the hands of a labor arbitrator, analysts said Monday.
It also means US Airways'' creditors will have to vote for or against the carrier''s reorganization plan before knowing a key factor: Whether the cash-strapped airline can shed $2 billion in pension liabilities over the next seven years.
Creditors will have to vote on something without knowing the full story, said Michael Boyd, head of the Boyd Group, an airline consultancy based in Evergreen, Colo.
The federal judge hearing US Airways'' bankruptcy case on Saturday night granted the airline''s request to terminate the plan, as long as a yet-to-be-chosen arbitrator determines that doing so would not violate the collective-bargaining agreement with the pilots.
The mixed ruling really didn''t surprise me, Boyd said. The judge realizes the airline has to go forward, but he also knows that the airline and the pilots have to like each other in order for it to go forward.
U.S. Bankruptcy Judge Stephen Mitchell''s ruling in the Alexandria, Va., court also left hanging the Pension Benefit Guaranty Corp. The agency, which insures retirement plans, had been waiting for Mitchell''s ruling before deciding whether to grant US Airways'' request to take over the pilots pension plan.
An arbitrator is supposed to hear the matter on March 13.
We won''t be taking any steps until the resolution of the collective-bargaining dispute by the arbitrator, Gary Pastorius, spokesman for the Pension Benefit Guaranty Corp., said yesterday.
On Jan. 30, US Airways filed for a distress termination of the plan. That means the pension agency would take over the pilots plan, which covers nearly 8,000 pilots, retirees and other beneficiaries.
But the Pension Benefit Guaranty Corp., by statutory limit, would pay out no more than $28,585 annually to a pilot retiring this year at the mandatory age of 60, Pastorius said. Retiring at 65, a pilot would get an annual pension of $43,977.
The amounts compare with pilot retirement benefits that usually range between $50,000 and $70,000, the Air Line Pilots Association said.
There is pain here, Boyd said of the slashed retirement benefits. But this pain is better than going completely out of business.
The analyst called Judge Mitchell''s ruling a victory for the airline, but only provided the arbitrator recognizes his ruling could cause the airline to go out of business.
In place of the defined benefit plan, US Airways wants to create a defined contribution plan. The airline has drafted the latter, which would cost $850 million over seven years, instead of the current $2 billion.
The details of the proposed plan are supposed to be negotiated between the pilots union and US Airways management.
US Airways declined comment yesterday about the pending negotiations, as well as the arbitrator''s proceedings.
In testimony Saturday, CEO David Siegel reiterated management''s position that without terminating the pilot pension, it would be forced to liquidate — instead of reorganize — the airline.
Only by resolving the pension issue, he said, can US Airways obtain a much-needed, $900 million loan guaranty from the government and $440 million in credit and equity capital from the Retirement Systems of Alabama, which is funding the airline while in bankruptcy.
Separately yesterday, US Airways said general counsel and executive vice president Michelle Bryan would resign shortly after the company exits bankruptcy, which it hopes will occur before April 1. She would be replaced by Elizabeth Lanier, who had held a similar position with Trizec Properties Inc.
PITTSBURGH (Tribune-Review) - A bankruptcy judge''s conditional approval for US Airways to terminate its pilots pension plan leaves much of the airline''s prospects for recovery in the hands of a labor arbitrator, analysts said Monday.
It also means US Airways'' creditors will have to vote for or against the carrier''s reorganization plan before knowing a key factor: Whether the cash-strapped airline can shed $2 billion in pension liabilities over the next seven years.
Creditors will have to vote on something without knowing the full story, said Michael Boyd, head of the Boyd Group, an airline consultancy based in Evergreen, Colo.
The federal judge hearing US Airways'' bankruptcy case on Saturday night granted the airline''s request to terminate the plan, as long as a yet-to-be-chosen arbitrator determines that doing so would not violate the collective-bargaining agreement with the pilots.
The mixed ruling really didn''t surprise me, Boyd said. The judge realizes the airline has to go forward, but he also knows that the airline and the pilots have to like each other in order for it to go forward.
U.S. Bankruptcy Judge Stephen Mitchell''s ruling in the Alexandria, Va., court also left hanging the Pension Benefit Guaranty Corp. The agency, which insures retirement plans, had been waiting for Mitchell''s ruling before deciding whether to grant US Airways'' request to take over the pilots pension plan.
An arbitrator is supposed to hear the matter on March 13.
We won''t be taking any steps until the resolution of the collective-bargaining dispute by the arbitrator, Gary Pastorius, spokesman for the Pension Benefit Guaranty Corp., said yesterday.
On Jan. 30, US Airways filed for a distress termination of the plan. That means the pension agency would take over the pilots plan, which covers nearly 8,000 pilots, retirees and other beneficiaries.
But the Pension Benefit Guaranty Corp., by statutory limit, would pay out no more than $28,585 annually to a pilot retiring this year at the mandatory age of 60, Pastorius said. Retiring at 65, a pilot would get an annual pension of $43,977.
The amounts compare with pilot retirement benefits that usually range between $50,000 and $70,000, the Air Line Pilots Association said.
There is pain here, Boyd said of the slashed retirement benefits. But this pain is better than going completely out of business.
The analyst called Judge Mitchell''s ruling a victory for the airline, but only provided the arbitrator recognizes his ruling could cause the airline to go out of business.
In place of the defined benefit plan, US Airways wants to create a defined contribution plan. The airline has drafted the latter, which would cost $850 million over seven years, instead of the current $2 billion.
The details of the proposed plan are supposed to be negotiated between the pilots union and US Airways management.
US Airways declined comment yesterday about the pending negotiations, as well as the arbitrator''s proceedings.
In testimony Saturday, CEO David Siegel reiterated management''s position that without terminating the pilot pension, it would be forced to liquidate — instead of reorganize — the airline.
Only by resolving the pension issue, he said, can US Airways obtain a much-needed, $900 million loan guaranty from the government and $440 million in credit and equity capital from the Retirement Systems of Alabama, which is funding the airline while in bankruptcy.
Separately yesterday, US Airways said general counsel and executive vice president Michelle Bryan would resign shortly after the company exits bankruptcy, which it hopes will occur before April 1. She would be replaced by Elizabeth Lanier, who had held a similar position with Trizec Properties Inc.
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