United Airlines May Dump Pensions
ROBERT SIEGEL, host:
From NPR News, this is ALL THINGS CONSIDERED. I'm Robert Siegel.
A federal bankruptcy judge has given the go-ahead to United Airlines to terminate its employee pension plans. The judge approved a deal that United worked out with the PBGC, the federal agency which insures employee pension plans. NPR's Cheryl Corley has been covering the proceedings in Chicago today, and she joins us from the courthouse there.
Cheryl, explain for us the deal that United asked for and that the judge approved today.
CHERYL CORLEY reporting:
Well, I--what you hear, first of all, is United's flight attendants who have said that they might conduct kind of intermittent work stoppages as a result of this decision. And they are doing a bunch of chanting in protest of this decision.
But to go back to your point about what actually the agreement is--it allows United to transfer all of its four major pensions--the pensions for flight attendants, for pilots, mechanics and ground workers--to the Pension Benefit Guaranty Corporation. That, of course, is the federal agency which insures pensions.
And the lead attorney in court today, James Sprayregen, said that United got to this point and had to consider getting rid of its pension after the airline failed a couple of years ago to win government backing for loans it had hoped to receive to help it exit bankruptcy. Until that time, he said the pensions were kind of the elephant in the room that everybody was tiptoeing around.
United's pensions are underfunded by almost $10 billion, and United says it's that kind of load which has makes it difficult to attract investors. So it crafted this deal with the PBGC which calls for the agency to assume control of all of those pensions, and the agency says that this plan will help United find the exit door to bankruptcy.
SIEGEL: Now as we heard just a moment ago, there are some people...
SIEGEL: ...some of them are very vocal in their opposition to this agreement.
SIEGEL: And there are people who have called upon the Pension Benefit Guaranty Corporation to back out of the plan. Any chance of that?
CORLEY: Yeah. A very little chance of that, Robert. The Pension Benefit Guaranty Corporation is underfunded itself, has a deficit of its own, and had really been concerned about United's ever-growing pension liability. As I said, the PBGC is going to be able to guarantee a certain amount, $7 billion, of that $10 billion that's underfunded, and they really wanted to take this step in order to cut their losses.
I should point out, also, that Judge Eugene Wedoff, the bankruptcy court judge in this case, said in any bankruptcy, what companies and unions and investors have to do is choose the least bad among a number of unfortunate choices. And he said that the least bad here was this agreement and one that keeps a company like United functioning, keeps employees employed and creditors paid. Judge Wedoff said the alternative to that will be a worse choice, which will be a shutdown of a company that results in a loss of both employment and pay. I think employees have a different opinion, but that's what the judge had to say to that.
SIEGEL: Cheryl, you've given us one measure of this deal, $10 billion. But what about the measure of it in terms of the number of workers and retirees who are covered by the pension plans in question?
CORLEY: Yeah. Well, what they say is they're going to suffer a lot of loss as a result of this deal. I think people are really still working out the figures; a lot have been bandied about, a number of things, that they will lose 30 to 50 percent of the benefits that they had expected. But we'll see if that is actually the deal once they have more concrete figures.
SIEGEL: That's about 100,000 people who are covered.
NPR's Cheryl Corley in Chicago, thank you very much.
CORLEY: You're welcome, Robert.