Sponsor Message:
Civil Aviation Forum
My Starred Topics | Profile | New Topic | Forum Index | Help | Search 
UAL Set To Clear Another Huge Hurdle In Ch. 11  
User currently offlineStevenUhl777 From , joined Dec 1969, posts, RR:
Posted (12 years 3 weeks 2 days 19 hours ago) and read 4012 times:

Here's an article posted on USA TODAY.com:

Senate passes pensions relief bill, sends it to the president
By Christine Dugas, USA TODAY
Legislation to provide relief to companies facing big pension plan contributions was passed Thursday by the U.S. Senate, and the White House said President Bush "looks forward to promptly signing this important legislation into law."
The Senate approved the bill 78-19 a week after the House approved the measure and just in time for the April 15 deadline for quarterly pension payments.

The legislation will save about 31,000 companies $80 billion over two years by updating the formula used to calculate contributions to traditional, "defined-benefit" plans. About 35 million workers are covered by such plans.

Companies are required to figure their pension contributions using the assumption that a plan's assets will grow only at the same rate as the interest rate on the 30-year Treasury bond, which is no longer issued. That rate is artificially low, which forced companies to make bigger contributions to pensions.

Some companies threatened to freeze pension benefits if Congress didn't act.

"This legislation immediately helps American workers by alleviating the uncertainty their employers have experienced over the past three years in trying to fund their pension plans based on a benchmark that doesn't exist," said Mark Ugoretz, head of the ERISA Industry Committee, a pension industry group.

In recent years pensions have been hard hit by the stock market downturn and low interest rates. Even the stock market rebound last year wasn't enough to overcome the impact of low rates on sagging pensions.

The new law will affect more than 32,000 companies that offer traditional pensions to 44 million workers.

It will provide $1.6 billion in additional aid for struggling airline and steel companies. According to Fitch Ratings, the pensions of seven airlines — American, United, Delta, Northwest, Continental, US Airways and Alaska — are underfunded by $20 billion.

Pensions become underfunded when their future retirement benefit obligations exceed plan assets.

Pension reform is particularly important to United Airlines, which faces $4.2 billion in pension payments though 2008 and is trying to exit bankruptcy-court protection. The law is expected to strengthen United's application for federal loan guarantees by making it a better risk.

The legislation is only a temporary fix. "We are already working on a proposal for permanent funding reform," Ugoretz says.

This is GREAT news for UAL!!! It's another huge hurdle that they will overcome.

11 replies: All unread, jump to last
User currently offlineArtsyman From United States of America, joined Feb 2001, 4748 posts, RR: 32
Reply 1, posted (12 years 3 weeks 2 days 18 hours ago) and read 3939 times:

While this is really good news for UAL, I think it sets a strange example for everyone else. UAL as well as not paying their bills, no longer has to pay Pension contributions while everyone does. I would also not say that UAL cleared a hurdle, I would say that the government cleared one for them.


User currently offlineStevenUhl777 From , joined Dec 1969, posts, RR:
Reply 2, posted (12 years 3 weeks 2 days 18 hours ago) and read 3895 times:

The government also cleared a hurdle for other airlines as well, as US, AA, DL et. al. will also benefit from this pension funding formula.

UAL's CFO Jake Brace indicated that UA is able to meet it's pension obligations, but not on an accelerated schedule. That was in a prior press release.

Jeremy I think you're right in saying it's a strange example, as it came down to Congressional action to resolve this, and was totally out of UAL (and other airlines) control, meaning they themselves couldn't arbitrarily change their funding schedule.

User currently offlineUal777contrail From , joined Dec 1969, posts, RR:
Reply 3, posted (12 years 3 weeks 2 days 18 hours ago) and read 3847 times:

Lets just wait for the negativity of b747-437b, he will put a whole new spin on this topic.


User currently offlineGreg From United Kingdom, joined May 2005, 0 posts, RR: 0
Reply 4, posted (12 years 3 weeks 2 days 18 hours ago) and read 3808 times:

Considering the drain on funds, the negative equity, and the banks scrambling to secure assets...it's not clearing a hurdle...it's just a yield sign on the way to Chapter 7....but not just for United.

Ten years ago..who would have imagined this!?

User currently offlineOrdpark From United States of America, joined Nov 2003, 610 posts, RR: 1
Reply 5, posted (12 years 3 weeks 2 days 17 hours ago) and read 3770 times:
Support Airliners.net - become a First Class Member!

The airline industry has changed a great deal in the last ten years, Greg. It's not just UA or the airline industry that benfits from this legislation....

The UA bashers notwithstanding, United IS gonna emerge from CH11 and will once again be a healthy carrier. I realize there is an element on this website that would be overjoyed to see UA cease to exist but I'm afraid we're gonna disappoint you!

User currently offlineGreg From United Kingdom, joined May 2005, 0 posts, RR: 0
Reply 6, posted (12 years 3 weeks 2 days 17 hours ago) and read 3728 times:

No, I've always loved UA..and are still my carrier of choice across the Pacific. And despite the probems, our company still buys biz class tickets on them.

But there are some realists on here..myself included, that just don't see them pulling out of this anytime soon...if at all.

It's easy to accumulate a lot of cash---which UA is doing--when you don't have to pay your bills.

The bloodletting will begin again once the payments starts.

I wish UA all the best...but I think there will be a lot a memorabilia on the market in about 18 months....

Good Luck!

User currently offlineArtsyman From United States of America, joined Feb 2001, 4748 posts, RR: 32
Reply 7, posted (12 years 3 weeks 2 days 17 hours ago) and read 3673 times:

The government also cleared a hurdle for other airlines as well, as US, AA, DL et. al. will also benefit from this pension funding formula.

Sadly it doesn't help Continental at all. They are currently ahead of the game on their pension contributions as opposed to being 4-6 billion behind like some of the others.

Whatever the case, if I were an employee, I'd be happy


User currently offlineAa717driver From United States of America, joined Feb 2002, 1566 posts, RR: 13
Reply 8, posted (12 years 3 weeks 2 days 11 hours ago) and read 3473 times:

Bull! This simply allows airline management to divert more money from pension plans that were contractually agreed upon. I guarantee management plans are unaffected.

Management got their butts in a crack because they pulled money out of overfunded pension plans during the boom of the '90's and then got caught short when 9/11 hit and accelerated the resession. This bails them out of their current situation and screws the employees.

You know Congressional pensions are unaffected.TC

FL450, M.85
User currently offlineWorldTraveler From , joined Dec 1969, posts, RR:
Reply 9, posted (12 years 3 weeks 2 days 8 hours ago) and read 3360 times:

Sadly, AA717driver is right. Pensions were a very positive impact on balance sheets in the late 90's and were a key part of the network carriers' success. It is simply irresponsible to reward the airlines for their financial neglect - although everyone recognizes the real reason that giving the airlines a little break now MIGHT be enough to keep the network airlines from terminating their pension plans in the near future.

On another topic, very little has been said on this board about the growing international opposition to bailing out failing airlines as it relates to expectations UAL has of getting out of bankruptcy. Is there no connection between what it happening at Alitalia, Air Canada, and Swiss and what is happening at United? Yes, there is. The European Union has recently voted to start penalizing service companies such as airlines that are artificially supported by government assistance. The EU is very right in expecting that airlines need to live or die based on their own merits. The EU also recognizes that consolidation needs to occur in the industry and the EU is willing to allow a couple carriers to fail in order to build a viable industry for the long-term. Canada's PM has indicated a very watchful-from-a-distance stance with regards to AC's troubles. The USA and UAL in particular will rightly face very strong opposition if the ATSB chooses to provide a government loan to UAL.

IF UAL has such a great business model, then find the funding to restructure from the private sector, not from the American taxpayers.

User currently offlineYyz717 From Canada, joined Sep 2001, 16524 posts, RR: 54
Reply 10, posted (12 years 3 weeks 2 days 8 hours ago) and read 3314 times:

This is of limited help to UA.

UA's overwhelming primary barrier to survival is not pension plan commitments, but its operating margin. Until UA can consistently book operating profits, it is doomed to Chapter 7.

Incidently, I would strongly push for the elimination of ALL DB pension plans...even in well run companies they can be an albatross around the financial neck.

I dumped at the gybe mark in strong winds when I looked up at a Porter Q400 on finals. Can't stop spotting.
User currently offlinePlanemaker From Tuvalu, joined Aug 2003, 7210 posts, RR: 37
Reply 11, posted (12 years 3 weeks 2 days 8 hours ago) and read 3313 times:

When you look at every other industry, there has been significant consolidation - steel, aluminum, autos, pharmaceuticals, oil, etc. It is only natural that the same will happen with airlines once governments stop propping up bankrupt carriers. There is no need to have over 10 airlines in the US.

Talking of pension obligations, here's an article from the Dallas Morning News:

'Legacy' airlines facing doom?
Grim conditions will cause top carriers to fail, experts predict

09:04 AM CDT on Thursday, April 8, 2004
By ERIC TORBENSON / The Dallas Morning News

WASHINGTON – Unable to bring down their high costs fast enough, many traditional airlines are doomed to fail, experts at an airline conference said Wednesday.

Growing costs for pensions and health benefits for retirees are exacerbating cost disadvantages that major carriers face compared with discount competitors. The grim cost picture combined with a steadily smaller share of revenue spells big trouble, even for carriers that have restructured themselves in the past two years, such as Fort Worth-based American Airlines Inc.

For rest of article:


Nationalism is an infantile disease. It is the measles of mankind. - A. Einstein
Top Of Page
Forum Index

This topic is archived and can not be replied to any more.

Printer friendly format

Similar topics:More similar topics...
UAL Set To Loose 3.2BN In 2002 posted Wed Jan 1 2003 18:12:17 by Coronado
Can NW Dump Mesaba And Pinn In Ch. 11? posted Fri Aug 19 2005 15:03:30 by LUVRSW
AZ: EU Set To Clear Restructuring Plan posted Fri Jun 3 2005 07:41:28 by Scotron11
UAL Wants To Buy Another Airline! posted Fri Feb 18 2005 18:17:35 by DeltaFFinDFW
WJ Set To Annouce Expansion Of Service In YYZ posted Wed Jan 14 2004 00:05:29 by CanadaEH
Steven Wolf's 2 Airlines In Ch. 11: Coincidence? posted Wed Dec 18 2002 22:37:51 by 727LOVER
Delta To Add Another City In Florida posted Fri Jun 30 2006 11:05:02 by MAH4546
Aloha Cleared To Exit Ch. 11 posted Wed Nov 30 2005 07:56:25 by Scotron11
Two Airlines Prepare To Leave Ch. 11 posted Sun Sep 18 2005 07:13:38 by TACAA320
US Airways Gets OK To Emerge From Ch. 11 posted Fri Sep 16 2005 18:00:16 by AirRyan