Federal agency to oversee pensions for United ground workers, retirees
By Mike Colias, The Associated Press
Friday, March 11, 2005
Chicago - The federal agency that guarantees employee pensions said today it plans to assume responsibility for the pension payments of 36,000 United Airlines' ground workers and retirees.
The Pension Benefit Guaranty Corp. said the pension fund for baggage handlers, ramp workers and public-contact workers has just $1.2 billion to cover $4.1 billion in promised payments.
The agency, which filed its motion in U.S. district court today, said it could guarantee $2.1 billion of the shortfall.
Depending on the employee, benefits would be reduced 20 to 50 percent from what they were promised by the bankrupt airline if the court appoints PBGC to take over the pension, according to International Association of Machinists and Aerospace Workers vice president Robert Roach Jr.
United, a unit of Elk Grove Village, Ill.-based UAL Corp., has missed $363 million in payments to IAM's pension since July, the pension agency said. United repeatedly has said it must terminate and replace its pensions to save money to exit a 27-month bankruptcy.
"PBGC has taken this step ... because United has failed to have any meaningful discussion that would avoid pension termination," Roach said today.
He said the union would meet with United and PBGC officials Monday to restate its position that "termination of the pension plan is not acceptable." United on today said it is studying the pension agency's motion.
"While we believe it is best to resolve our pension issues at the bargaining table, we continue to believe that termination and replacement of all our defined benefit pension plans is necessary," spokeswoman Jean Medina said.
The IAM in January agreed to a short-term labor agreement that cut members' wages 11.5 percent to allow more time to settle the pension issue. That contract expires next month.
In January, PBGC moved to take over the pension plan for more than 14,000 active and retired pilots. The agency estimated it would be responsible for about $1.4 billion of the plan's $2.9 billion in underfunded assets.
The pension agency, already saddled with a $23 billion deficit, moved to take over the IAM's pension to avoid $227 million in benefit increases set to take effect in coming months. By filing the motion today, the agency won't have to pay any of that increase if it eventually takes over the plan.
"If the PBGC waits, the costs to the pension insurance program are going to go up dramatically," PBGC spokesman Randy Clerihue said.
Separately, United on today said it anticipated increased business later this year and would recall 500 flight attendants that had been on voluntary furlough. About 300 flight attendants will return June 1, while the remainder will resume working in July.
Also today, United said two fare increases it implemented last month helped offset revenue it lost after Delta Airlines announced a new fare structure in January.
John Tague, United's executive vice president of marketing, sales and revenue, acknowledged that Delta's move was a "revenue-negative" for United but said the effect has not hurt the carrier as badly as many analysts had predicted.
"United now has largely offset the negative implications" of Delta's fare decrease, he said, "and our revenue performance is back on track."