United Makes Formal Pension Demise Request

November 8, 2004 (PLANSPONSOR.com) - United Airlines has made good on its word and formally announced that it was dropping its four employee pension plans.

United is also asking flight attendants for almost $138 million annually in new concessions, according to news reports.

United Chief Executive Glenn Tilton told employees last week that the industry had been hit hard by high fuel costs and low fares, and that United needed to save an additional $2 billion a year, on top of $5 billion in cuts already planned. One third of the new savings would come from labor costs, a second third from pension replacements, and the rest from non-labor cuts. Tilton said that he and seven other executives would also take 15% pay cuts.

For their part, the air carrier’s unions are promising to battle Tilton at every turn and say they’re going to meet later this month to settle on a specific strategy. “It’s really not new, but it’s in black and white now,” said Joe Tiberi, spokesman for the machinists’ union, which has sued United Airlines officials to protect pensions.

Meanwhile, the company said it hopes pilots’, machinists’, mechanics’ and flight attendants’ unions will all voluntarily agree to the cutbacks. The company has scheduled time before a US Bankruptcy judge for a ruling on the matter in case such agreement is not forthcoming.

The Pension Benefit Guaranty Corporation (PBGC), the agency which insures private-sector pension plans,  said in September that it would be liable for $6.4 billion in pension obligations if United ends all four plans, which cover 119,000 workers and retirees. Since the plans are underfunded by $8.3 billion, workers and retirees could lose $1.9 billion in benefits, the PBGC said.