Sponsor Message:
Civil Aviation Forum
My Starred Topics | Profile | New Topic | Forum Index | Help | Search 
Pension Plans Killing Legacy Carriers?  
User currently offlineFlyingHippo From United States of America, joined Aug 2005, 680 posts, RR: 1
Posted (8 years 11 months 2 weeks 5 days 12 hours ago) and read 2378 times:

With all the airlines barely floating above water, cutting wages doesn't seem like the solution given today's oil prices at $66 per barrel.

When AC went into bankruptcy, they restructured they pension plan and came out of it. UA is trying to do the same. So... here is the $1 question: if the legacy carriers get rid of their pensions plan and change it to other retirement plans such as 401K (just like all other companies), do you think it will fly with the unions?

Ofcourse, you will have to do this tactfully... say if you're less than 10 years from your retirement and have put xx number of years into this airline, your pension plan will not change.

If you are under the age of 50 (10+ years until retirement), your pension will be reduced in half, but your wage will not be cut, and you can still save for retirement with 401K.

If you're under the age of 40 or you're a new employee... well, you will be moved over to the 410K plan, where you have to contribute to your retirement funds and be responsible.

I know this idea is far fetched and might anger some people, but just a thought...

[Edited 2005-08-12 18:24:50]

23 replies: All unread, jump to last
 
User currently offlineFlyGuyClt From United States of America, joined Aug 2005, 537 posts, RR: 8
Reply 1, posted (8 years 11 months 2 weeks 5 days 12 hours ago) and read 2363 times:

Quoting FlyingHippo (Thread starter):
When AC went into bankruptcy, they restructured they pension plan and came out of it. UA is trying to do the same. So... here is the $1 question: if the legacy carriers get rid of their pensions plan and change it to other retirement plans such as 401K (just like all other companies), do you think it will fly with the unions?

With what is going on in the world today. We must except the fact that this business has changed. So we are at a fork in the road. We must now chose what road to take. Mind you all roads will have bumps. The company I work for wants to "FREEZE" (meaning the clock stops and so does your benefits, however, they will stay at current level) the pension and start a matching 401K. Giving all that is going on with other airlines that are in Chapter 11, this is the road with the least amount of bumps to me.

Safe Flying  

[Edited 2005-08-12 18:24:39]


Florida Express, Braniff II and ......
User currently offlineJetjack74 From United States of America, joined exactly 11 years ago today! , 7405 posts, RR: 50
Reply 2, posted (8 years 11 months 2 weeks 5 days 12 hours ago) and read 2355 times:
Support Airliners.net - become a First Class Member!

It's the oil prices that are killing the industry. It's up $67 dollars a barrel today.


Made from jets!
User currently offlineFlyGuyClt From United States of America, joined Aug 2005, 537 posts, RR: 8
Reply 3, posted (8 years 11 months 2 weeks 5 days 11 hours ago) and read 2340 times:

Quoting Jetjack74 (Reply 2):
It's the oil prices that are killing the industry. It's up $67 dollars a barrel today.

And unfortunatly the oil business has all of us around the world by the "short hairs."

Safe Flying  Smile

I want a better cheaper fuel. One that every country can produce for themselves. Gee, I am living in lala land huh?



Florida Express, Braniff II and ......
User currently offlineScarletHarlot From Canada, joined Jul 2003, 4673 posts, RR: 56
Reply 4, posted (8 years 11 months 2 weeks 5 days 11 hours ago) and read 2307 times:

It is unethical and immoral to take away a promised pension. People plan for their retirements with their employer's promise in mind. It's one thing to freeze a defined benefit plan and enrich a 401(k) plan - it's quite another to decrease benefits already earned or shunt a plan off to the PBGC. Take this example. You're 60 and have worked for an airline since you were 20. You've been promised a generous pension the entire 40 years. Suddenly, the airline goes into bankruptcy and the pension plan goes to the PBGC. Now your pension will only be half of what was promised. What the heck do you do to make up for the shortfall?

The company I work for created a new cash balance pension plan a few years ago. Employees were offered the choice of the new, more portable (but less generous) plan, or to stay in their old plan. Most younger employees went into the new plan, because they couldn't see themselves staying at the same job until age 55. Older employees stayed in the old plan because it was so much richer. New hires, like me, all went into the new plan. But at the same time, the 401(k) plan was enriched. This is perfectly fair. I know what is promised and I am being encouraged and helped to save for my own retirement.



But that was when I ruled the world
User currently offlineFlyingHippo From United States of America, joined Aug 2005, 680 posts, RR: 1
Reply 5, posted (8 years 11 months 2 weeks 5 days 11 hours ago) and read 2290 times:

Quoting ScarletHarlot (Reply 4):
You're 60 and have worked for an airline since you were 20. You've been promised a generous pension the entire 40 years. Suddenly, the airline goes into bankruptcy and the pension plan goes to the PBGC. Now your pension will only be half of what was promised. What the heck do you do to make up for the shortfall?

That's why I said:

Quoting FlyingHippo (Thread starter):
say if you're less than 10 years from your retirement and have put xx number of years into this airline, your pension plan will not change.


User currently offlineYYZYUL From Canada, joined Jun 2005, 16 posts, RR: 0
Reply 6, posted (8 years 11 months 2 weeks 5 days 10 hours ago) and read 2247 times:

AC did not restructure their pension plan

At one point Mr Victor Li when he was involved in the restructuring of AC wanted to make some major changes to the pension plans but the unions would not play ball..in the end AC came out of CCAA with many concessions from the unionized employees but the pension plans were not touched.

YYZYUL


User currently offlineSaab2000 From Switzerland, joined Jun 2001, 1610 posts, RR: 11
Reply 7, posted (8 years 11 months 2 weeks 5 days 10 hours ago) and read 2217 times:

The legacy carriers are being badly damaged by:

-Overcapacity in the industry
-Bad Management
-Too many layers of workers who do not produce revenue
-Fuel costs
-Incredible inefficiency (related to point #2)

Notice that nowhere on that list is employee compensation or pensions. You can starve your workers and still lose money here. I wish every carrier would look at SWA and figure out what they are doing right. They are more efficient and have far fewer people sitting in offices doing non-revenue type work.

I have a relative who works for NWA and flat out admits that her job is a waste of time and money for the company. She works with the NWA website. Not unimportant, to be sure, but she claims that the IT Dept. at NWA is wildly overstaffed and inefficient.

This at the same time that they are trying to drastically cut pilot salaries, outsource maintainance, reduce Flight Attendant compensation to something similar to fast food level wages.

All the legacy carriers are really dumb if they think they can return their companies to profitability by starving their employees.



smrtrthnu
User currently offlineTropicBird From United States of America, joined May 2005, 502 posts, RR: 0
Reply 8, posted (8 years 11 months 2 weeks 5 days 9 hours ago) and read 2188 times:

Some people miss the main point on this issue. If the airlines could charge what it cost to fly along with a reasonable profit then there would not be a need for pay cuts or pension elimination. But instead all the cutthroat competition comes in and wrecks havoc then goes away and another soon after takes it's place.

We had the likes of People Express, Western Pacific, Air Florida, Muse Air, New York Air and on and on. No sooner are they gone (along with the excess capacity) and another batch comes along.... Jet Blue, Spirit, independence Air, the (New) Frontier, Air Tran and so on.

So the legacy carriers never have a chance to catch their breath before another LLC arrives and with it their low wage structure. Whose fault is that? Certainly not the dedicated workers who built up these founding air carriers over the many years since the very inception of commercial aviation in America and the rest of the World. What did they do wrong other then follow all those very costly rules & regulations?

The FAR Part 121 airline business was really not meant for the "free market" model. It is too heavily regulated and capital intensive to be jerked around by the likes of money hungry Wall Street types. Safety & service comes with a high price and I am willing to pay for that cost of peace of mind.


User currently offlineLuvflng From Costa Rica, joined Nov 2000, 178 posts, RR: 0
Reply 9, posted (8 years 11 months 2 weeks 5 days 8 hours ago) and read 2157 times:

Pension Plans, high Salaries, Airlines laden with unions worked fine in the pre-deregulation cca. before 1978. During that time many routes were subsidized and allotted by the US government and if a carrier was experiencing a financial shortfall, it would ask the Government for permission to raise fares to cover this. Until then mainly people with money were flying as the fares were not cheap. It was until mid 70's that AA started offering the Super Saver fares and put in motion the basic Yield/Revenue management mechanism to discount tickets and lower fares.

1978 rolls around and the industry is deregulated and free to compete on any routes and able to set prices as they like. It became aligned with the Free Market, but as many know a company in this environment must be lean and efficient, while the deregulated carriers were not due to taking with them the legacies of Promised pensions, ever increasing salaries, etc... This would not be bad if these issues were handled swiftly, however, nobody really cared and these issues have been plaguing legacy carriers for decades.

There are two extremes (1) if we love our legacies and do not want to slash pensions etc... in short preserve inefficiencies RE-REGULATE the aviation industry and protect it or (2) give way to Creative destruction which disposes the inefficient firms with more flexible and efficient ones. In the latter scenario, you loose pensions, plush inefficient jobs etc... which get recreated through reincarnation of new airlines, but pay salaries and benefits nowhere close to the legacies before. Sadly(joyously), we are moving to the option # 2 because that is the only way to go.
Well there is a third option. You and I will start paying higher fares. Yeah right! I think that option is out. In fact, we the consumers are pushing these giants out of business, by our relentless search for cheap fares.

-luvflng



Radar Contact Terminated, Squawk VFR
User currently offlineMidnightMike From United States of America, joined Mar 2003, 2892 posts, RR: 14
Reply 10, posted (8 years 11 months 2 weeks 5 days 7 hours ago) and read 2115 times:

Quoting Jetjack74 (Reply 2):
It's the oil prices that are killing the industry. It's up $67 dollars a barrel today.

Some of the airlines were hurting before the rise of a barrel of oil.....



NO URLS in signature
User currently offlineLawnDart From United States of America, joined May 2005, 970 posts, RR: 3
Reply 11, posted (8 years 11 months 2 weeks 5 days 1 hour ago) and read 2060 times:

Quoting TropicBird (Reply 8):
Some people miss the main point on this issue. If the airlines could charge what it cost to fly along with a reasonable profit then there would not be a need for pay cuts or pension elimination. But instead all the cutthroat competition comes in and wrecks havoc then goes away and another soon after takes it's place.

We had the likes of People Express, Western Pacific, Air Florida, Muse Air, New York Air and on and on. No sooner are they gone (along with the excess capacity) and another batch comes along.... Jet Blue, Spirit, independence Air, the (New) Frontier, Air Tran and so on.

Southwest is charging what it costs them to fly, and making a reasonable profit. And WN has some of the highest wages (that have never been cut) and one of the richest pension benefit plans. What the legacy carriers are facing at the moment (and for the future) is a market demanding to fly at a lower cost, and they are scrambling to get those costs down.

You made a good point when you mention PeoplExpress and the likes being replaced by JetBlue et al...the point being legacy carriers have had, what...over twenty freakin' years to figure out how to operate like a low-cost carrier and compete??? And they still haven't done it!

Competition is the name of the capitalist game, and it's not going away. And low cost carriers have been wreaking havoc in the industry for a long, long time...yes, some of them are irrational players like Independance Air, but those players usually fail - unfortunately they cause a lot of damage in the meantime. But a truly healthy airline would be able to endure periods of irrational costs/pricing (and maybe help the nuts go away more quickly).


User currently offlineAtmx2000 From United States of America, joined Oct 2004, 4576 posts, RR: 38
Reply 12, posted (8 years 11 months 2 weeks 4 days 21 hours ago) and read 2007 times:

Quoting ScarletHarlot (Reply 4):
Take this example. You're 60 and have worked for an airline since you were 20. You've been promised a generous pension the entire 40 years

The companies often agreed to provide those generous pensions in negotiations with employee unions that employed the threat of a strike or actual strikes to get their way. And those agreements were made without any real visiblity into future market conditions.

Quoting Saab2000 (Reply 7):
Notice that nowhere on that list is employee compensation or pensions. You can starve your workers and still lose money here. I wish every carrier would look at SWA and figure out what they are doing right. They are more efficient and have far fewer people sitting in offices doing non-revenue type work.

I have a relative who works for NWA and flat out admits that her job is a waste of time and money for the company. She works with the NWA website. Not unimportant, to be sure, but she claims that the IT Dept. at NWA is wildly overstaffed and inefficient.

But it follows that if they are employing dead weight, that employee compensation and benefits is a problem as well. Dead weight payroll, whether it comes from paying employees too much for the tasks they do, or employing too many people for the task are two sides of the same coin, and often comes about through negotiations with employee unions who demand not only higher pay rates but also reduced labor output from employees.



ConcordeBoy is a twin supremacist!! He supports quadicide!!
User currently offlineHawker From Australia, joined Aug 2004, 105 posts, RR: 0
Reply 13, posted (8 years 11 months 2 weeks 4 days 21 hours ago) and read 2003 times:

Am I correct in assuming that accounting standards in America require a corporation reporting a profit to include provision for future pension costs?

Its not just airlines that have this problem of course. I read somewhere GM have a massive pension liability in the billions for the next 50 odd years.

How then can they compete with China?


User currently offlineAtmx2000 From United States of America, joined Oct 2004, 4576 posts, RR: 38
Reply 14, posted (8 years 11 months 2 weeks 4 days 20 hours ago) and read 1995 times:

Quoting Hawker (Reply 13):
Its not just airlines that have this problem of course. I read somewhere GM have a massive pension liability in the billions for the next 50 odd years.

How then can they compete with China?

A) Discover some key technology that improves productivity of their existing workforce, lowering production costs, and then jealously protect that advantage.

B) Invent technologies appealing to consumers and patent them.

C) Take advantage of foreign labor to serve domestic markets and position one selves in foreign markets to take advantage of the increased consumer buying power and eventual strengthening of those currencies. The profits from overseas ventures can fund necessary technology development to stay competitive in all markets.

D) Find some way of pawning the liability off on to the public at large, who benefited in the past from the costly union contracts directly or indirectly but at the same time want inexpensive products and thus increasingly buy low cost foreign produced goods.

If the US automakers had been as nimble as US computer makers and as ruthless at taking advantage of the lowest cost producers globally and using the savings to invest back into product development, they would likely have retained a significant technology advantage over all competitors. Unfortunately unions have prevented them from taking advantage of lower cost labor, including lower costs nonunion labor in South and Southwest US.



ConcordeBoy is a twin supremacist!! He supports quadicide!!
User currently offlineEwr756 From United States of America, joined Nov 2004, 35 posts, RR: 0
Reply 15, posted (8 years 11 months 2 weeks 4 days 5 hours ago) and read 1931 times:

I would add to ScarletHarlot's first statement: It is also immoral for airline managements to retain their lucrative pensions, golden parachutes, etc. while eliminating/reducing the pensions of their employees.


There are no secrets in aviation.
User currently offlinePositiverate From United States of America, joined May 2005, 1590 posts, RR: 8
Reply 16, posted (8 years 11 months 2 weeks 4 days 5 hours ago) and read 1916 times:

Regardless if what the other posts say, I think that some of the carriers are acting very responsibly when it comes to this issue. Take for instance the lobbying effort done by DL, NW and their employees in support of pension reform legislation introduced by Sen. Johnny Isakson (S.861). The idea is to freeze the DB plan, allow for a time preriod to transition to a DC plan, and extend the amortization period so airlines have more time to meet their obligations. At DL the employees, ALPA, and management are all in lockstep behind this proposal (a rare occurrence).

User currently offlineSaab2000 From Switzerland, joined Jun 2001, 1610 posts, RR: 11
Reply 17, posted (8 years 11 months 2 weeks 4 days 3 hours ago) and read 1892 times:

To blame the unions for the problems of the airlines is to have a very narrow view of things. I am an ALPA member but I also see the needs of the company. Most union members do as well.

But a contract is a contract and if the company signs it they cannot just unilaterally decide that it is no longer feasable to abide by the contract.

Yes, the airlines are in trouble and the pension liability is a real issue. Unions would feel a bit more open to dealing with the issue if the upper management of the airlines were not awarding themselves large bonuses at a time of crisis in the industry. Even if the total amount of money is not large in the grand scheme of things, it is pretty hard for a worker bee like myself to vote in favor of concessions when the top execs of companies are in the news with bonuses worth hundreds of thousands of dollars per year.

A big part of the problem is the issue of inefficiency within large organisations. As I said in my first post here, SWA is the example of how it can be done and everyone is a winner.

I will say again, starving your employees is not the way to profitability. SWA is fair AND they make money. It can be done.



smrtrthnu
User currently offlineAtmx2000 From United States of America, joined Oct 2004, 4576 posts, RR: 38
Reply 18, posted (8 years 11 months 2 weeks 4 days 3 hours ago) and read 1883 times:

Quoting Saab2000 (Reply 17):
A big part of the problem is the issue of inefficiency within large organisations. As I said in my first post here, SWA is the example of how it can be done and everyone is a winner.

I will say again, starving your employees is not the way to profitability. SWA is fair AND they make money. It can be done.

Southwest is in good shape because they have been paying attention to these issues for a long time. They don't have the dead weight other airlines have. Squeezing inefficiency out of the system is going to mean laying people off, which means some people will "starve."



ConcordeBoy is a twin supremacist!! He supports quadicide!!
User currently offlineSaab2000 From Switzerland, joined Jun 2001, 1610 posts, RR: 11
Reply 19, posted (8 years 11 months 2 weeks 4 days 2 hours ago) and read 1861 times:

Quoting Atmx2000 (Reply 18):
Southwest is in good shape because they have been paying attention to these issues for a long time. They don't have the dead weight other airlines have. Squeezing inefficiency out of the system is going to mean laying people off, which means some people will "starve."

Yes, there will be layoffs. That is obvious. What I am referring to here is taking large concessions from labor while management not only takes little or no cuts, but actually increases its payroll, which is what has happened at NWA in my colleague's department.



smrtrthnu
User currently offlineM404 From United States of America, joined Nov 2003, 2224 posts, RR: 5
Reply 20, posted (8 years 11 months 2 weeks 4 days 1 hour ago) and read 1848 times:
Support Airliners.net - become a First Class Member!

One factor always presented to us during negotiations was that management will do their job and try and get work rule changes that offset wage and benefit increases. That is why their are Contract Openers or "Wish Lists" from both sides presented as a first step. Paring each list down in a give and take is the normal route negotiations should take. Up until about a year ago statistics released by the US Labor Dept did in fact show that American labor had become more efficient when compared to output per dollar much faster than European counterparts. Companies like NWA were examples of increased efficiencies in the methods of operations.

Time available to match higher fuel costs with have run out. Their is no doubt both sides have squandered that time to some extent. Some pensions were underfunded before the recent price spikes but nearly all were after. Take from Peter to pay Paul.

NW has long ago proposed almost what is outlined in the thread starter. Preserve but freeze the Defined benefit plans and start new Defined Payment ones. Details are to be discussed in negotiations but nothing as yet is decided. Those vested would keep what was vested. Of course the deferred payments are a major part of this plan.

New plans however that radically change the number of people employed to take advantage of these or any pensions have now been introduced that have taken much of the negotiations back to the beginning are heard daily. Transition is the key. From pensions to total operating environment. If a Legacy is to become effective against the LCCs it will be radical and ugly towards older accepted ideas. Both sides have to prove to the other that they are willing to work honestly with each other to survive. Are these newly introduced plans meant to be worked out to include present employees or are they to be forced out to have a new, if not clean, playing field. Will management use the present climate to avoid the Railway Labor Act with Washington's tacit approval or will honor on both sides create a viable industry? This is what labor is trying to be careful of. Can the concept and operation of a totally new kind of airline evolve that, at some undefined time, will become viable for both employee and owner as well as the traveling public without massive dislocation and violent upheavals? Can this process be replaced by logical thinking and honesty? That's the real goal.



Less sarcasm and more thought equal better understanding
User currently offlineCkfred From United States of America, joined Apr 2001, 5174 posts, RR: 1
Reply 21, posted (8 years 11 months 2 weeks 3 days 9 hours ago) and read 1795 times:

One of the reasons that WN is profitable is that it has no 401(k) plans. According to several friends who fly for legacy carriers, that is one reason why WN pilots want to raise the retirement age. They don't have defined-benefit plans.

Something that the legacies could look into is closing their pension plans for new hires. The unions would have to agree, but many Fortune 500 companies that have no unionized workers have or are planning to do this.

IBM closed its plan last Decmeber 31st.

Still, oil is a major problem. I remember being shocked that gas in the Chicago area reached $1.50 in February, 2000. Today, it's anywhere from $2.61 to $2.79, and 93 octane is going for up to $2.99 a gallon.

My wife keeps complaining about the credit card bills, and I keep pointing out that fill-ups that used to cost $20 to $25 now cost $35 to $40. Imagine having to pay for 15,000 pounds of jet fuel as opposed to 15 gallons of 87 octane.


User currently offlineScarletHarlot From Canada, joined Jul 2003, 4673 posts, RR: 56
Reply 22, posted (8 years 11 months 2 weeks 3 days 9 hours ago) and read 1792 times:

Quoting Ckfred (Reply 21):
One of the reasons that WN is profitable is that it has no 401(k) plans. According to several friends who fly for legacy carriers, that is one reason why WN pilots want to raise the retirement age. They don't have defined-benefit plans.

A 401(k) plan and a defined benefit plan are two different things. A 401(k) plan is known as a defined contribution plan. I can't believe Southwest has neither. Do they have a 401(k) but no DB plan?



But that was when I ruled the world
User currently offlineBurnsie28 From United States of America, joined Aug 2004, 7531 posts, RR: 8
Reply 23, posted (8 years 11 months 2 weeks 3 days 9 hours ago) and read 1779 times:

Quoting FlyingHippo (Thread starter):
UA is trying to do the same.

Well I dont know that they are really trying, funny how everytime its almost due, they ask for another extension, are they actually even working on it there at UA.



"Some People Just Know How To Fly"- Best slogan ever, RIP NW 1926-2009
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...
Future Of US Legacy Carriers Post-new Threats posted Fri Aug 11 2006 15:57:30 by B777A340Fan
Congress May Save NWA Pension Plans posted Sat May 13 2006 13:49:12 by KarlB737
$50 Fare Inc By US Legacy Carriers... posted Sat Apr 8 2006 00:03:12 by AirRyan
The Answer For LCC Vs Legacy Carriers? posted Sun Feb 5 2006 16:13:33 by Mirrodie
Unadvertised Benefits Of The Legacy Carriers posted Sat Dec 24 2005 02:21:13 by Cory6188
Silly Article From Msnbc On Legacy Carriers posted Wed Nov 2 2005 17:42:59 by Greenguy01
Sum Up The Future Of US Legacy Carriers posted Sun Sep 18 2005 02:43:35 by Afrikaskyes
Legacy Carriers Defense Of Fortress Hubs posted Tue Jul 19 2005 22:55:02 by Apodino
Lack Of Competition Between Legacy Carriers posted Wed Jul 13 2005 01:51:15 by Cory6188
Legacy Carriers Bad Management/Bad Business Plan posted Sun Jul 3 2005 04:37:51 by Workbench