StevenUhl777 From , joined Dec 1969, posts, RR: Posted (9 years 8 months 6 days 14 hours ago) and read 2872 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.
Artsyman From United States of America, joined Feb 2001, 4745 posts, RR: 36 Reply 1, posted (9 years 8 months 6 days 14 hours ago) and read 2799 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.
StevenUhl777 From , joined Dec 1969, posts, RR: Reply 2, posted (9 years 8 months 6 days 14 hours ago) and read 2755 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.
Ordpark From United States of America, joined Nov 2003, 559 posts, RR: 1 Reply 5, posted (9 years 8 months 6 days 13 hours ago) and read 2630 times:
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!
Aa717driver From United States of America, joined Feb 2002, 1566 posts, RR: 13 Reply 8, posted (9 years 8 months 6 days 7 hours ago) and read 2333 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.
WorldTraveler From , joined Dec 1969, posts, RR: Reply 9, posted (9 years 8 months 6 days 4 hours ago) and read 2220 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.
Planemaker From Tuvalu, joined Aug 2003, 5712 posts, RR: 35 Reply 11, posted (9 years 8 months 6 days 4 hours ago) and read 2173 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.