United Airlines is petitioning a bankruptcy court to allow them to default on their employee pension funds so that the federal government’s Pension Benefit Guaranty Corp. will assume the $3.1 billion pension payments due in the next three years alone.
Of course, all the other airlines (as well as any corporations with large pension obligations) are watching closely to see if United gets away with it, so they can do the same thing in order to balance there books on the backs of the taxpayers.
In light of the recent bankruptcy reform bill, based on the philosophy that debts should be born by those who incurred them and not passed off on the rest of us, is there any justification for this huge giveaway to big business?
On one hand, I don’t really think that taxpayers should foot United’s pension obligations- that’s United’s problem.
On the other hand, I don’t want to see a bunch of retirees get fucked because of incompetent management either. I’m sure somebody’s going to say that these retirees should have seen to their own retirement, but working for a company with a good pension plan WAS seeing to your own retirement.
I think that somehow pensions and the like should be separate from the company as a whole- if the company craps the bed, then the pensions are still safe. I’m just not sure how to do it though.
I, too have mixed feelings. On one hand, I am utterly and completely sick of the government bailing out the airline industry. If they go bankrupt, so what? Smaller companies will buy their planes and take over their routes. It’s not like air travel will cease entirely if United isn’t flying the friendly skies.
However, I hate to see those poor retirees take it on the chin.
I wish to god pension funds were escrowed so the company couldn’t touch it.
No. Bigness shouldn’t equate to special treatment.
The only problem I have with this is that the article doesn’t really give us enough details about what’s going on. What happens to the pension fund if UAL doesn’t get what it wants? Would the feds be bailing out the airline or floating it a long term loan? Anyone got a better article on the situation.
I don’t know. That’s not meant to be snarky. I don’t like the idea of people getting fucked out of the retirements they were promised, and worked for. They earned what ever that package was. On the other hand, many large companies have learned that they can pretty much do anything they want, get protection and tariffs to insulate them from fair competition, squander whatever money they have, and divest all the profitable divisions while pouring money into the losers, and STILL get government help and bailouts.
I say, give United the same “bankruptcy” condtions that are now being levied on the working stiffs. Make them file lots of papers and get mandatory counseling, and then make them pay off every last penny.
Because I guarantee, no matter how fucked up stupid the management was, they will get their fat bonuses, stock options and golden handshakes, while they do away with or plunder the retirement accounts.
I agree with most of the above that the situation sucks.
On a related thread I make the case that if companies like United had defined contribution plans - 401Ks - then we wouldn’t be having this discussion at all. I think this is the inevitable result of defined benefit plans. And United is just the tip of the iceberg.
The upshot is that if you are a little guy, using bankruptcy to avoid paying your debts is shameful, but if you are a multi-billion dollar corporation, it is just good business. Look for a spate of corporate “bankruptcies” designed to take advantage of this new ruling to balance the books at the expense of the taxpayers and pensioners.
Also, note that the next thing United wants to use the courts for is to invalidate agreements with the unions:
Once again, if you are a little guy, you are accountable for the agreements you sign, no matter how painful it is to live up to them; but if you are a corporation, accountability is just too burdensome. John Edwards was right; there are two Americas, one for the rich and one for the rest of us.
This whole situation is appalling. IMO, United should NOT be allowed to slough off their pension responsibilities onto the govt., as long as they have other options. Even if those options mean the end of United. Why should I cry over the dissolution of a business that is run so poorly? United should have to honor its pension agreements, even if they have to sell off all of their assets. Let’s face it–they’re on the way out, anyway. When they go out of business, other, better-run airlines will buy up their assets and capacity and hire a great many of their employees. (Not all, I’m sure, and it will be rough, but at least someone of working age has a shot at getting another job, while a retiree–or someone who is approaching retirement age and counting on their pension–is simply screwed when the pension vanishes.)
Shame on the court for allowing this. Now every other airline will have to follow suit just to stay somewhat competitive, and we, the taxpayers will have to subsidize them … and for what? I sure as hell don’t see the advantage to us. I think anyone who believes this one little bailout is going to save this bloated companies is fooling themselves. Eventually, the airlines are going to fail again, beyond anyone’s wishes to bail them out, and we’ll still find ourselves with the same consequences–people out of work, airline travel disrupted. I say we should let the companies die on their own now, rather than keep them on expensive life support for years. Too bad the court thinks otherwise.
I’m not defending United, but are you sure the government is picking up the tab? I have yet to see an article that explains how the pension “default” works. It almost sounds to me like they are just reducing benefits and turning over the adminstration to someone else to get the bad credit off their books.
If anyone has a good explanation of this point, I’d really like to hear it. I think there is a lot of misinformation floating around here.
I think this is just the tip of the iceburg. Basically, pension funds CANNOT pay out benefits to people who will live well into their 80’s! The situation is even worse for governemnt: government pension schemes are actuarily unsound; they are funded out of current revenues, and the tax burden of supporting them will lead either to:
(1) crippling taxes, starting around 2010, OR
(2) reduction of benefits
basically, we as a society cannot support people who live for decades beyond retirement.
The solution? either delay retirement (upping retirement to 67 or 68), or lese allow massive immigration into this country 9and pray that these people will pay taxes).
No easy choices!
I think people here need to be reminded that the corporate big wigs get million dollar bonuses,and stock options. How about instead of paying all these bonuses, they pay the retirement that they have not only promised. But taken money from people for, for the last 60 years. I also want to remind people that if you work… YOU COULD BE NEXT. How about we make United responsible for things they have not just promised, but taken from people. That money was paid into by employees, and that is money OWED to those people just as if you borrowed money from a bank. The bank will get its money from you. One way or another. Same for those employees that have based their lives on these pensions. Lets not have another ENRON. Where thousands of people were left out in the cold by lack of protection from a government that is supposed to be “for the people”. wildirish
And this is before the $6.6 billion from United, plus the billions that will almost certainly follow from American and other shaky companies, who will be forced to dump their pensions simply to stay competitive.
The Pension Benefit Guaranty Corp. is a pension insurance entity that has been losing money for years; last year the deficit more than doubled to over $23 billion last year:
Adding obligations for not just United’s pensions, but all the rest of the legacy airlines who are under the same pressure, will guarantee that ultimately it will be you and I who bear the burden of the airlines pension responsibilities.
Just from my own personal, selfish perspective: I don’t want United to fail, and I don’t want United workers to go on strike, at least within the next month or so – because I have tickets to fly with them in a couple of weeks. On a trip I’ve been looking forward to for months.
I’m only going by what I heard, or at least what I think I heard, on NPR yesterday. They had an analyst who said that American Airlines will likely seek the same treatment. The idea being that United is now getting an unfair advantage that AA would also like to get.
NPR also said that at least one union warned United about this very situation about 5 years ago when there was a chance to nip this in the bud, and United refused to listen and/or act.
While I feel sorry for all the current and past employees of United, the tax payers, should not be responsible for bailing out one company, and potentially most of the industry, because they ran their business using a model that was pretty much guaranteed to fail, 9/11 or not.
I agree. Frankly, I think that everybody involved in United’s management should be forced to sell off most of their assets in order to help cover the cost of the pensions. It’s their incompetence that forced them to break their contracts, they shouldn’t get to retire to their mansions.
I certainly see AA wanting this advantage, but I don’t see them being willing to pay the price to get it. According to the local newscast last night United is only able to do this because they are currently in bankrupcy. AA is not in bankrupcy and they are doing what they can to stay out of it. Going into bankrupcy to be able to slough off their pension responsibilities is a pretty big deal. I don’t know if the cost/benefit analysis comes out, but the flight attendant’s Union for AA has threatened to strike if they see AA trying to abandon the pensioners. So not only would they have to declare bankrupcy, deal with the court costs and re-organizations thereof, but they’d probably have a strike on their hands. That’s a lot of hassle to reduce the load the pensioners add on to the bottom line.