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Topic: AA/CO Vs. DL/NW Over Pension Bill
Username: BigGSFO
Posted 2006-08-03 16:35:14 and read 4498 times.

I am surprised nobody has discussed this yet. A showdown is looming in DC over the proposed pension reform bill. As it applies to the airlines, DL and NW, both in bankruptcy, will be allowed 17 years to fully fund their plans while AA and CO will only get 10. AA/CO want to be treated fairly, and rightfully so - they managed their pensions better than NW and DL (who could use bankruptcy to terminate their plans like UA and US), and now are being penalized for doing so.

http://www.usatoday.com/money/perfi/...08-03-pensions-usat_x.htm?csp=N008

Topic: RE: AA/CO Vs. DL/NW Over Pension Bill
Username: Commavia
Posted 2006-08-03 17:24:17 and read 4446 times.

Very unfortunately, I think this battle has already been lost -- the bill has already passed the House, and the House has already left town in typical Washington fashion. The bill is going to pass the Senate, and American and Continental -- both of which have lived up to their promises and funded their employees' pensions -- will get screwed.

Washington.
So typical.

Topic: RE: AA/CO Vs. DL/NW Over Pension Bill
Username: Bobnwa
Posted 2006-08-03 18:46:47 and read 4400 times.

Quoting Commavia (Reply 1):
and American and Continental -- both of which have lived up to their promises and funded their employees' pensions -- will get screwed.

How can doing what they agreed to do, be interpreted as being screwed.

Topic: RE: AA/CO Vs. DL/NW Over Pension Bill
Username: COERJ145
Posted 2006-08-03 19:04:27 and read 4370 times.

Quoting BigGSFO (Thread starter):
(who could use bankruptcy to terminate their plans like UA and US

After US was merged with HP, didn't the pensions get restored? or are they still in talks about it?

Topic: RE: AA/CO Vs. DL/NW Over Pension Bill
Username: Commavia
Posted 2006-08-03 19:39:34 and read 4331 times.

Quoting Bobnwa (Reply 2):
How can doing what they agreed to do, be interpreted as being screwed.

Because the government is picking favorites and rewarding airlines that froze their pension plans (namely Delta and Northwest). On the contrary, American and Continental have not frozen their plans, nor dumbed them on the government and taxpayers (a la United/USAirways). And yet, Delta and Northwest are going to get 17 years to fully fund their plans, while American and Continental are going to get only 10. Furthermore, Delta and Northwest will be able to assume a rate-of-return on investment for funding calculations that is substantially more generous than the rate American and Continental will get.

Please explain to me: how is this fair?

American and Continental have both continue to reliably fund their employees' pension plans, and both have said repeatedly that they don't want to dump the plans, nor freeze them. They want to keep on funding them, catch up on their funding, and give their employees what they promised.

And yet Washington, D.C. is telling them, essentially, either freeze your plan or face being uncompetitive with airlines that have either dumped their plans or frozen them.

Disgusting.

Topic: RE: AA/CO Vs. DL/NW Over Pension Bill
Username: Bobnwa
Posted 2006-08-03 19:44:54 and read 4328 times.

Quoting COERJ145 (Reply 3):
After US was merged with HP, didn't the pensions get restored? or are they still in talks about it?

I could be wrong, but I don't belive that America West had defined pension plans.

Topic: RE: AA/CO Vs. DL/NW Over Pension Bill
Username: WorldTraveler
Posted 2006-08-03 19:48:25 and read 4317 times.

Take a deep breath.

Senate leaders have said they will pass the bill as is and then make technical corrections to the bill in the fall removing the bankrupt carrier bias.

Washington realizes that DL and NW cannot wait another 45 days for Congress to readjourn and fix these very small differences so they will pass it as is and correct it later.

We should all be very glad that no more airline employees are going to lose their pensions since Washington finally heard the airline industry’s cries for help.

The irony is that the carriers that will keep their pensions could well have lower retirement costs than UA and US that dumped their pensions – and have less interference from the government in their restructuring efforts.

Topic: RE: AA/CO Vs. DL/NW Over Pension Bill
Username: Positiverate
Posted 2006-08-03 20:17:06 and read 4298 times.

Quoting Commavia (Reply 1):
The bill is going to pass the Senate, and American and Continental -- both of which have lived up to their promises and funded their employees' pensions -- will get screwed.

They're not getting screwed. AA and CO chose to negotiate a CBA that does not allow for a freeze in accruals to the pension plans. Some airlines have the ability to freeze their accruals. The Congress has chosen to offer two options:

Option 1: freeze accruals and limit the liability of the PBGC and the taxpayer, and take a 17 year amortization at 8.85%. HOWEVER, you also pay a termination penalty of $2500 per plan member, multiplied by 3.

Option 2: contuinue to accrue (which exposes the PBGC to more liabiltiy), but instead take a 10 year amortization at the yield curve. Termination penalties are halved.

Any airline can take either option. The irony is CO gets tot ake BOTh options since they have frozen their pilot plan.

Quoting Commavia (Reply 4):
Because the government is picking favorites and rewarding airlines that froze their pension plans (namely Delta and Northwest). On the contrary, American and Continental have not frozen their plans, nor dumbed them on the government and taxpayers (a la United/USAirways). And yet, Delta and Northwest are going to get 17 years to fully fund their plans, while American and Continental are going to get only 10. Furthermore, Delta and Northwest will be able to assume a rate-of-return on investment for funding calculations that is substantially more generous than the rate American and Continental will get.

Its funny. AA and CO weren't complaining when the government picked winners and losers and awarded them China routes. Or allowed AA to negotiate a favorable Love field deal. Where was the AA/CO outcry then?? Also, last time I looked Cincinnatti was in Ohio, yet both Ohio Senators tried to block this bill because they are pro-Continental (something the Delta employees will remember come election day; good luck Mike DeWine!). Where was the "fairness" then?

Quoting Commavia (Reply 4):
American and Continental have both continue to reliably fund their employees' pension plans, and both have said repeatedly that they don't want to dump the plans, nor freeze them. They want to keep on funding them, catch up on their funding, and give their employees what they promised.

As do DL and NW. Neither airline wants to dump its plans on the PBGC. That's why they and their employees came to the Congress to ask for help on this issue.

Quoting Commavia (Reply 4):
And yet Washington, D.C. is telling them, essentially, either freeze your plan or face being uncompetitive with airlines that have either dumped their plans or frozen them.

No, Washington is telling them that if they want to continue to expose the PBGC to more liability, then they need to take a different funding rule. You can't have it both ways. You can't say, ok, we want time to pay down our debt but also want to keep accruing that debt.

Quoting Commavia (Reply 4):
Disgusting.

What's disgusting is that CO and AA would seek to kill a bill, as they have been doing all week, in the Senate, which would save 151,000 employee and retiree pensions.

Quoting WorldTraveler (Reply 6):
Senate leaders have said they will pass the bill as is and then make technical corrections to the bill in the fall removing the bankrupt carrier bias.

Exactly. We will pass this bill after a colloquy which outlines a commitment to come back and fix the plan date language in the bill that appeases Continental. That fix will happen in September, and will be retoractive to today or tomorrow (whenever the Senate passes the bill). The Senate just hotlined the bill, so likely it will be on the floor this evening.

However, CO has bigger issues when it comes to their Washington activities. Looks like they may have an ethichs problem on their hands:

Necklace Envy
August 2, 2006
By Mary Ann Akers,
Roll Call Staff

House and Senate aides are buzzing about a late-night lobbying incident last week involving Rebecca Cox, the wife of former Rep. Christopher Cox (R-Calif.), who now serves as chairman of the Securities and Exchange Commission.

While lobbying for Continental Airlines on the pension bill, Cox wore her Member's spouse pin, which, of course, gave her access to restricted areas of the Capitol where conferees were meeting until the wee hours of the morning Friday.

Aides saw Cox at 1:15 a.m. standing outside the office of Senate Majority Leader Bill Frist (R-Tenn.), where conferees were scheduled to be meeting (though, in reality, they had moved down the hall to another Senator's hideaway). Cox, they said, was wearing her spouse pin conspicuously on a necklace.

"She had it prominently displayed on her necklace," a senior Republican aide to one of the Senate conferees told HOH. "No other lobbyist could have gotten into that area."

The aide said he found Cox's move "shocking" in this era of ethics and lobbying reform, though he had to acknowledge, grudgingly, that Cox did one heckuva job for Continental by snagging such great access.

"Good lobbying? Maybe," he said. "Inappropriate? Definitely. The fact that the wife of a former Member - he isn't even a current Member - is using the privileges given to her as such for personal gain, her business definitely crosses the line."

On its face, the pin Cox wore was still valid, since her husband was a Member of the current Congress, leaving late last year for the SEC.

Congressional rules do not appear to address the issue of whether the spouses of former Members may use their special pins during the practice of lobbying, said veteran ethics watchdog Fred Wertheimer, president of Democracy 21.

Wertheimer was unaware of the late-night lobbying incident involving Cox, but he said that "from a common-sense standpoint, it shouldn't have happened. From a rules standpoint, the House and Senate should have clear rules" for registered lobbyists who are married to both current and former Members of Congress.

"As a general proposition, lobbyists ought to all be operating under the same set of rules," Wertheimer said. "And former Members' spouses, or anyone else connected to Members who are professional lobbyists, should not have any special privileges that go beyond what lobbyists normally do."

A spokesman for the House Administration Committee, Jon Brandt, said Members and spouses are allowed to keep their respective pins after the Members' retirement.

Cox did not return phone calls to her office seeking comment. A spokeswoman for Continental Airlines, Julie King, said she tried to reach Cox "all afternoon" to no avail. She finally sent an e-mail stating, "While I haven't been able to connect with Rebecca, I have been able to speak with [Vice President of Congressional Affairs] Nancy Van Duyne, who said that 'this must not have been a restricted area, because there were several other lobbyists in the same area where Rebecca was at the same time.'"

Whatever the case, they certainly didn't have as nice a necklace as Cox.

Topic: RE: AA/CO Vs. DL/NW Over Pension Bill
Username: GoCOgo
Posted 2006-08-03 21:09:26 and read 4270 times.

Quoting Positiverate (Reply 7):
Also, last time I looked Cincinnatti was in Ohio, yet both Ohio Senators tried to block this bill because they are pro-Continental (something the Delta employees will remember come election day; good luck Mike DeWine!)

Last I checked, CVG is in Kentucky Big grin CLE is the only true passenger hub actually in Ohio.

Topic: RE: AA/CO Vs. DL/NW Over Pension Bill
Username: Positiverate
Posted 2006-08-03 21:12:19 and read 4267 times.

Quoting GoCOgo (Reply 8):
Last I checked, CVG is in Kentucky CLE is the only true passenger hub actually in Ohio.

Right, because no one ever goes into OH from that airport!  Smile Actually, I read that DL is the largest airline in OH in terms of capacity, and the largest at every airport with service witht he exception of DAY and CLE.

Topic: RE: AA/CO Vs. DL/NW Over Pension Bill
Username: Commavia
Posted 2006-08-03 22:59:10 and read 4209 times.

Quoting Positiverate (Reply 7):
They're not getting screwed.

Sure they are. Delta and Northwest have stopped putting money into their employees' pension plans, and as a result, they get a 7-year competitive advantage over Continental and American in fully funding their plans, plus -- much more significantly -- get to assume a much higher rate of return.

Now -- does this higher rate of return actually reflect any real market conditions? Of course not. There is absolutely no reason why Delta and Northwest would be able to get a higher rate of return on their plans' investments just because they froze them. In fact, American has actually been averaging a rate of return on investment from its plans that is far, far higher than what they are allowed to assume with current government funding rules. Indeed, if American were allowed to calculate its funding formulas based on the more realistic rates of return it has actually been achieving in previous years, much of their pension liability's funding gap would vanish.

Quoting Positiverate (Reply 7):
Its funny. AA and CO weren't complaining when the government picked winners and losers and awarded them China routes.

That's a little different. The government is supposed to select from a pool of candidates to operate foreign air service when their is a limited market.

Quoting Positiverate (Reply 7):
Or allowed AA to negotiate a favorable Love field deal.

That's a whole different story -- I don't even think the federal government should be involved in the slightest with what happens at Love Field.

Quoting Positiverate (Reply 7):
No, Washington is telling them that if they want to continue to expose the PBGC to more liability, then they need to take a different funding rule. You can't have it both ways. You can't say, ok, we want time to pay down our debt but also want to keep accruing that debt.

Well, as I said, American (I can't speak for Continental) has actually been funding its plans to a level far exceeding what it is able to assume for calculating government-regulated funding formulas, and has achieved a significantly higher rate of return than what the government allows them to assume.

Topic: RE: AA/CO Vs. DL/NW Over Pension Bill
Username: Positiverate
Posted 2006-08-03 23:27:11 and read 4177 times.

Quoting Commavia (Reply 10):
Quoting Positiverate (Reply 7):
They're not getting screwed.

Sure they are. Delta and Northwest have stopped putting money into their employees' pension plans, and as a result, they get a 7-year competitive advantage over Continental and American in fully funding their plans, plus -- much more significantly -- get to assume a much higher rate of return.

Delta and Northwest are also agreeing to take the draconian step of freezing their accruals, and thus freezing the PBGC and the taxpayer's exposure. Because they are taking such a step, they are given a different funding mechanism. If CO and AA had negotiated such a freeze provision in their CBA, they would take this option too. Hey, Will Ris was in the room too. He just didn't make your case as convincingly.

Quoting Commavia (Reply 10):
Now -- does this higher rate of return actually reflect any real market conditions? Of course not. There is absolutely no reason why Delta and Northwest would be able to get a higher rate of return on their plans' investments just because they froze them. In fact, American has actually been averaging a rate of return on investment from its plans that is far, far higher than what they are allowed to assume with current government funding rules. Indeed, if American were allowed to calculate its funding formulas based on the more realistic rates of return it has actually been achieving in previous years, much of their pension liability's funding gap would vanish.

See above. Also, the purpose of the bill was to protect the PBGC - not treat airlines differently. Northwest and Delta were told that they needed to freeze in order to get relief. Protecting the liability of the PBGC was tantamount in the eyes of Congress. American has never said what's in the Bill doesn't help them. It provides two years of DRC relief up front - which Congress was told by your lobbyists was worth over $2 billion to them, before they even get to the extra ten years. Congress is treating the sick with Northwest and Delta, Hard to understand why they are messing with this Bill.

Quoting Commavia (Reply 10):
Quoting Positiverate (Reply 7):
Its funny. AA and CO weren't complaining when the government picked winners and losers and awarded them China routes.

That's a little different. The government is supposed to select from a pool of candidates to operate foreign air service when their is a limited market.

Ohhhh, so it's different when the government picks winners and losers in your favor. And, regardless, the government STILL picked a winner and a loser in that case.

Quoting Commavia (Reply 10):
Quoting Positiverate (Reply 7):
Or allowed AA to negotiate a favorable Love field deal.

That's a whole different story -- I don't even think the federal government should be involved in the slightest with what happens at Love Field.

Right, which is why AA went running to Congress to fix that issue for them. Again, it's ok for the government to pick sides when it benefits AA.

Quoting Commavia (Reply 10):
Quoting Positiverate (Reply 7):
No, Washington is telling them that if they want to continue to expose the PBGC to more liability, then they need to take a different funding rule. You can't have it both ways. You can't say, ok, we want time to pay down our debt but also want to keep accruing that debt.

Well, as I said, American (I can't speak for Continental) has actually been funding its plans to a level far exceeding what it is able to assume for calculating government-regulated funding formulas, and has achieved a significantly higher rate of return than what the government allows them to assume.

Ok, and that's great. There are two plans, but again any of the airlines can pick one of the two plans. It is an open choice. One plan is for an airline which chooses to freeze their pensions. In that case, they will pay what they owe to the PBGC at a certain rate of interest over a certain period of time. In the other plan, airlines do not have to freeze their pensions and they pay their obligation to the PBGC at a certain rate over a certain amount of time.

Now, those rates and times are different because the two plans are different. The liabilities of the airlines are different. But Continental or American Airlines can choose to use the frozen plan with no problem whatsoever. If they think Northwest and Delta are getting a better deal, they can join them. They can freeze their plans and get the same repayment rate, same interest rate, same time to repay as Northwest and Delta. It is very simple. Two plans, but no airline is tied to a particular plan. They can make the choice they wish. In fact, Continental is using both plans.

And so the argument that Congress is being unfair and are picking winners and losers among the airlines simply does not apply in this case.

One more thing, even Wall Street says the provision is equitable. See the email from, Helane Becker below.

From: Helane Becker
Sent: Tue Aug 01 07:01:41 2006
Subject: Transport 8/1/06--PNCL Numbers; House Pension Bill; NWAC Flight Attendants

Transportation Comments Helane Becker

August 1, 2006 The Benchmark Company

Phone: 212-312-6764

Trading Desk: 212-312-6775

__________________________________________________________________

Airlines

Pinnacle Airlines (PNCL-$5.85-Sell) reported second quarter EPS this morning of $0.54 vs. $0.63 last year. This compared to our estimated of $0.40 and the consensus estimate of $0.39. Revenues in the quarter fell by 4% from $212.9 million to $204.5 million while expenses fell by 2.7% from $190 million to $185 million as the size of the fleet declined to 124 aircraft from 139.


We continue to believe there is downside risk in the common shares of Pinnacle Airlines because of Northwest Airlines (NWACQ-$0.55-Sell) decision to have its pilots fly regional jets.

Northwest Airlines flight attendants rejected their tentative agreement, which is surprising because the company implemented the March 1 tentative agreement last night. Northwest won bankruptcy court approval to implement this contract and tried to negotiate a deal with the flight attendants. At this time, Northwest has labor agreements with all of its other employees, so it has no choice if it wants to continue restructuring but to implement the March 1 agreement.

At the same time, we expect NWAC to ask the court for an injunction preventing the flight attendants from striking. Northwest does not have replacement flight attendants (as it had replacement mechanics last year) so any strike or work action by the flight attendants would have a detrimental effect on the airline. The flight attendants are required to give the company 15 days notice if they elect to strike.

A more negative scenario would be if the flight attendants started CHAOS (Create Havoc Around Our System) because this is more of a wild cat walk out. Flight attendants board planes and then walk off before take off, forcing the airline to cancel the flight. This has worked with some success at other airlines, but in the interim, passengers book away from the airline.

Separately, the US House of Representatives passed a pension bill designed to the pension bill passed by the House seemingly provides the same level of relief for all carriers with defined benefit pension plans. The bill does not seem to favor any carrier as long as they choose to freeze their defined benefit plans by the end of 2007 which would provide additional protections to the PBGC. The Bill also provides relief to those carriers that do not choose to freeze their plans.

This bill came out of the House and the Senate still has to vote on it. Since the Senate will be in recess after Friday, there is some risk that nothing will happen before the end of this session. In addition, there is always the risk that the President will veto the bill.

Topic: RE: AA/CO Vs. DL/NW Over Pension Bill
Username: Commavia
Posted 2006-08-04 00:09:48 and read 4148 times.

Quoting Positiverate (Reply 11):
If CO and AA had negotiated such a freeze provision in their CBA, they would take this option too.

Isn't it better for everyone -- the airlines, their employees, and the government -- if American and Continental continue to fund their plans fully, as both continue to do, and continue feel confident they will be able to do in the future as long as the government doesn't put them at an artificial disadvantage?

Topic: RE: AA/CO Vs. DL/NW Over Pension Bill
Username: Positiverate
Posted 2006-08-04 01:31:48 and read 4113 times.

Quoting Commavia (Reply 12):
Quoting Positiverate (Reply 11):
If CO and AA had negotiated such a freeze provision in their CBA, they would take this option too.

Isn't it better for everyone -- the airlines, their employees, and the government -- if American and Continental continue to fund their plans fully, as both continue to do, and continue feel confident they will be able to do in the future as long as the government doesn't put them at an artificial disadvantage?

The premise of your question is flawed since no airline is disadvantaged. No one is saying that AA and CO can not "continue to fund their plans fully". They absolutely can. Again, if you want to continue to expose the PBGC and the taxpayer to more liability by remaining in the DB world and continuing to accrue debt, then you get one set of rules. If you choose to cap the liability of the PBGC and the taxpayer, then you get a different set of rules. In fact, they meet the 80% funding rule according to their lobbyists. Every other company who meets the 80% funding rule gets only 7 years. Because AA and CO have "Airline" in their name, they get an additional 3! Hmmm...some might call that an advantage over other companies. Will Ris at AA is fine with this, and he has communicated that to Capitol Hill.

Topic: RE: AA/CO Vs. DL/NW Over Pension Bill
Username: Positiverate
Posted 2006-08-04 14:52:52 and read 4009 times.

Just as an update, this legislation overwhelmingly passed the Senate last evening by a vote of 93-5 (with 2 not voting). It now goes to the President for his signature.

Topic: RE: AA/CO Vs. DL/NW Over Pension Bill
Username: BigGSFO
Posted 2006-08-04 17:15:31 and read 3968 times.

AA's PR on the reform bill being passed. It's a positive press release. There's probably some posturing in there to gain the Senate's favor in order to accomplish other agenda items on AA's plate (requiring Congress' approval), such as the Wright Amendment proposal and the upcoming China authorities. But nonetheless, one issue apparently resvoled (for now), 999 to go.  Smile

http://biz.yahoo.com/prnews/060804/daf016.html?.v=71

Topic: RE: AA/CO Vs. DL/NW Over Pension Bill
Username: Burnsie28
Posted 2006-08-04 17:15:35 and read 3968 times.

If CO and AA are not having problems funding their pensions who cares, secondly, there is no competition here, its just allowing NW and DL to get longer times to pay their employee's retirement packages, there is no advantage here, its not going to gain you anything really.

Finally, I didn't see any CO or AA guys in DC pushing so hard, NW pilots certainly were there, and in a way they got rewarded for working so hard for this.

Topic: RE: AA/CO Vs. DL/NW Over Pension Bill
Username: Commavia
Posted 2006-08-04 17:30:35 and read 3959 times.

Quoting BigGSFO (Reply 15):
But nonetheless, one issue apparently resvoled

Obviously not:

"American does not object to the favorable rules given to airlines that have frozen their plans," Ris added. "We simply believe that those maintaining their plans should not be placed at a competitive disadvantage."

Quoting Burnsie28 (Reply 16):
I didn't see any CO or AA guys in DC pushing so hard

It was kind of hard to miss the "Working Together" MD80 American chartered into D.C. from Dallas/Fort Worth filled with pilots, flight attendants and other employees from all around the system who spent the better part of a week calling on senators and congressman and passing out information to elected officials.


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Topic: RE: AA/CO Vs. DL/NW Over Pension Bill
Username: Tod
Posted 2006-08-04 19:14:25 and read 3936 times.

What impact will this have on current NW retirees?

Tod

Topic: RE: AA/CO Vs. DL/NW Over Pension Bill
Username: Positiverate
Posted 2006-08-04 20:10:27 and read 3907 times.

Quoting Commavia (Reply 17):
It was kind of hard to miss the "Working Together" MD80 American chartered into D.C. from Dallas/Fort Worth filled with pilots, flight attendants and other employees from all around the system who spent the better part of a week calling on senators and congressman and passing out information to elected officials.

Actually, as someone who works in DC, it was pretty easy to miss. There were hundreds of DL and NW employees going door to door in Congress. Not a single AA employee was seen.

Quoting Commavia (Reply 17):
Quoting BigGSFO (Reply 15):
But nonetheless, one issue apparently resvoled

Obviously not:

"American does not object to the favorable rules given to airlines that have frozen their plans," Ris added. "We simply believe that those maintaining their plans should not be placed at a competitive disadvantage."

So what Will said there was this: "we do not object to the facvorable rules, nor are we saying we are at a disadvantage with this provision."


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