US Airways: Pilot Pension May Have to Go
Senators voted 64 to 31 on Wednesday against a proposal giving the beleaguered air carrier 30 years instead of seven to fix a $3.1-billion pension-funding problem, Reuters reported. The fund currently has about 50% of the necessary assets to fund its retirement payouts.
The pilots stand to lose a large percentage of their
retirement incomes if their pensions are wiped out. And
even though US Airways’ President and Chief Executive David
Siegel has said their plan will be replaced with a new one
if it is closed, the pilots are not so sure. “We have no
details,” Roy Freundlich, spokesman for US Airways’ pilots
in the Air Line Pilots Association, told Reuters. “All we
have are nods and winks from the company, and that’s just
not going to cut it.”
US Airways now has approximately one week left to
design a pension-funding solution and integrate it with its
pending bankruptcy reorganization plan. The company is
trying to expedite its remaining bankruptcy court
proceedings and January 31 is the last date on which it can
mail its proposed reorganization plan out to creditors for
a crucial vote.
US Airways also needs to win approval of its request for
$900 million in federal loan guarantees – a key component
of its business plan and a condition for its financing. The
pension gap is a major stumbling block in that effort.
The shrunken stock market has taken a bite out of the
retirement pensions of legions of workers. Major US
airlines could show an $18.9 billion shortfall in their
pension funding for the end of 2002, led by a $4.4 billion
gap at Delta Air Lines, Fitch ratings agency said earlier
this month (See
Fitch: Airlines’
Pension Picture ‘Most Dire’
).
US Airways’ pilots have already agreed to wage and benefit
cuts they say total more than $640 million a year.
A US Airways plan termination could bring the federal pension insurer, the Pension Benefit Guaranty Corp., (PBGC) into the picture. The PBGC continues to make pension payments for bankrupt or ailing companies according to federal guidelines. The agency had opposed the US Airways payment extension as being unfair to other companies who are struggling to fund their pensions (See PBGC: US Airways Pension Break Unfair to Competitors ).