US Airways: Pilot Pension May Have to Go

January 24, 2003 (PLANSPONSOR.com) - Fresh from a defeat by the US Senate of a bill giving it more time to make required pension payments, US Airways claims it may now have to institute a "distress termination" of its pension plan covering 4,000 pilots.

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 ).

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