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Airline to end pension plan
©Associated Press ARLINGTON, Va. -- US Airways filed Thursday to terminate its underfunded pension plan with its pilots, a move the airline considers a last major hurdle to emerging from bankruptcy by March 31. But the 6,000 pilots, who have endured 1,800 furloughs and agreed to $565-million annually in concessions to try to save the airline, say they are being unfairly singled out and will take legal action to stop the company from canceling the plan. "We've been doing our very best to help keep the company afloat," said Roy Freundlich, spokesman for the US Airways unit of the Air Line Pilots Association. "But this is one letdown too many." US Airways chief executive David Siegel wrote a letter to pilots this week saying the airline has no choice but to file for termination of the plan: If the issue is not resolved, the airline cannot obtain the financing needed to avoid liquidation, Siegel said. "The risk of doing nothing creates greater uncertainty for you individually, and for all of us collectively, with regard to our company's successful restructuring," Siegel wrote. US Airways spokesman Chris Chiames said about 8,000 people, including current and furloughed pilots, retirees and widows are part of the pension plan. He said retirees will receive "the bulk" of their promised payments, but did not specify an amount. "It is very important that everyone clearly understand our pilots are not being wiped out," Chiames said. When the airline terminates the plan, it will be taken over by the federal Pension Benefits Guaranty Corp. That will severely cut the benefits paid to retired pilots. Most pilots will receive a pension no larger than $28,000 a year if the Pension Benefits Guaranty Corp. takes over the plan, although some older pilots with seniority would qualify for a higher payment, Freundlich said. Under the old plan, most pilots would have received annual payments of $50,000 to $70,000 a year, Freundlich said. The airline, though, says the average pilot receives a $130,000 annual pension. US Airways will start a new retirement plan for pilots when the old one is terminated, Siegel said. The new plan will be in addition to the PBGC pension pilots will receive. But that new plan will be a defined contribution plan as opposed to the old defined benefits plan. That means that older pilots will have little time to accumulate significant savings, while junior pilots will have to hope that the stock market performs well to obtain a sizable benefit. Pilots will not have to contribute to the new retirement plan to participate, Chiames said. While many airlines have pension liabilities because of the industry's financial struggles and the stock market's poor performance the last three years, US Airways is in a unique situation because of its bankruptcy filing. While other airlines can wait to see if a better stock market will fix their liabilities, US Airways must resolve the problem immediately so it can obtain the financing needed to emerge from bankruptcy. Freundlich said the situation is unfair because the government essentially gets to buy the pension program during a dip in the stock market. If the stock market improves, the government could actually make a profit, he said. The union and the airline have lobbied for congressional legislation that would allow the company to continue the current plan, and pay down its unfunded liability over 30 years. But the legislation has stalled, and the union claims the company has not lobbied aggressively enough. "We feel they only put on a facade of commitment to that process," Freundlich said. The company says it lobbied aggressively and continues to do so, hiring the former lead lawyer at the PBGC to aid its effort. Pensions for the airline's other unions are not affected. The pilots' union says this is unfair, but the company says the other, smaller pension plans cannot be terminated under law because doing so would not achieve the savings necessary to emerge from bankruptcy. A bankruptcy judge must approve the airline's plan to terminate the pension plan. A hearing is scheduled Feb. 20. Chiames said the PBGC has indicated it will not try to oppose US Airways' proposal.
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From the Times Business report
From the AP
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