Oakland Tribune

United accepts trustee to oversee pensions
By Bloomberg News

Wednesday, August 18, 2004 - UAL Corp.'s United Airlines agreed to appoint an independent trustee to protect the interests of participants and beneficiaries of the carrier's pension plans, the U.S. Labor Department said.

The trustee, to be chosen by the Chicago-based company with the department's approval, will review funding, assert claims and file lawsuits if necessary on behalf of the plans, the department said in a statement. The trustee must be in place before Sept. 15, when a $400 million payment is due, the department said.

UAL, the world's second-largest airline company, plans to skip about $575 million in pension contributions this year and an unspecified amount next year to conserve cash to exit bankruptcy. The company's board in June changed the structure for managing the plans by eliminating an administrative committee and appointing UAL as the sole trustee, the department said.

United Airlines is the dominant airline in the Bay Area and operates more than half the flights at San Francisco International Airport, which it uses as a West Coast hub. UAL employs nearly 14,000 workers at SFO, and a total of 16,000 in the Bay Area. The airline also maintains a prominent position at both Norman Y. Mineta San Jose International Airport and Oakland International Airport.

"It was clear they had such a stark conflict of interest that the company could no longer represent the workers in the plan," said Ann L. Combs, assistant secretary of labor for the Employee Benefits Security Administration, in an interview.

The department "quite often" seeks trustee appointments at companies where such conflicts clearly exist, Combs said. For example, the department sought a trustee for Enron Corp. plans, she said.

A United spokeswoman didn't immediately return a telephone call to comment.

United on July 14 deferred $72.4 million in pension-plan contributions due that month, and has $404.2 million due on Sept. 15 and $91.2 million due on Oct. 15. the company sponsors four major pension plans covering almost 120,000 employees, the Labor Department said.

The Pension Benefit Guaranty Corp., a federal agency that monitors corporate pension plans, said Friday that it filed an objection to UAL's plan to skip some required payments.

Unions representing bag handlers and flight attendants also have filed objections in bankruptcy court.

"There appears to be a recognition of the need for independent oversight as it relates to United's decision not to fund its own employee pension plans," said Sara Nelson Dela Cruz, a spokeswoman for Association of Flight Attendants, in an interview.

Joe Tiberi, a spokesman for the International Association of Machinists, which represents United bag handlers and customer- service workers, said the union had no immediate comment. The Air Line Pilots Association said in an e-mail that it wouldn't have a statement Tuesday.

Last month, the company got $500 million in additional bankruptcy financing to cover operations through mid-2005. UAL has been in Chapter 11 bankruptcy protection from creditors since December 2002.

AMR Corp., parent of American Airlines, is the biggest airline company.