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Attack on unions could spread through airlines
UAL tries to slash pensions

By Lee Sustar | August 6, 2004 | Page 15

UNITED AIRLINES is attacking unionized workers' pensions in a move that's likely to trigger similar cutbacks across the industry. In mid-July, United–which is operating under supervision of bankruptcy court–skipped a $72 million payment to the Pension Benefit Guaranty Corp. (PBGC), the federal agency that insures retirement pay for millions of workers at many of the country's largest corporations.

United–whose pensions are underfunded by $7.5 billion–claimed the move was necessary in order to secure a deal for $1 billion in financing. It was illegal to skip the pension payment, according to a PBGC spokesperson.

Unions at United have protested. But United CEO Glenn Tilton is calculating that his strong-arm tactics will force both the unions–which have already taken $2.5 billion in concessions–to roll over.

If he gets away with it, it'll be because Congress has already signaled open season on pensions with a law passed earlier this year that allows companies to reduce their pension contributions. This will worsen the crisis at the PBGC, where funds for potential pension liabilities were $350 billion in the red last year.

"We are now in an environment where employers want to get out of the pension business," John Hotz of the Pension Rights Center told the Chicago Tribune. "So they are going to use examples like United to push for government regulations favorable to companies or simply jettison their own plans." If United dumps its pension plans, the PBGC would pick up the tab–but could pay as little as half of the money owed to retirees.

In 2001, TWA–since bought out by American–dropped pension funds covering 36,500 workers, leaving the PBGC to cover TWA's obligations with substandard benefits. US Airways last year dumped its pilots' pension fund into the PBGC–and if United follows suit, the remaining airline industry giants, Delta and American, would likely follow suit.

This tactic has already been used in the steel industry, where LTV and Bethlehem wiped out pensions to pave the way for mergers with other companies. If the airline industry takes the same course, the result could be a meltdown of the PBGC–and even lower benefits.

"The agency can't take a lot of $5 billion hits, multiple times per year, year after year, and survive," former PBGC director Steven Kandarian told the New York Times. "Eventually, you'll run out of money." Airline executives are going to keep trying to steal workers' future–until unions draw the line on further concessions and fight back.

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