November 8, 2004

BY MARY WISNIEWSKI Business Reporter

After warning about it for months, bankrupt United Airlines finally announced that it would end its employee pension plans. Now its unions are digesting the information and deciding what to do.

"It's really not new, but it's in black and white now," said Joe Tiberi, spokesman for the machinists' union, which has sued United Airlines officials to protect pensions. He said the details of United's proposal are being reviewed.

A spokesman for the Air Line Pilots Association said union officials would meet for discussions in the middle of the month before responding.

In a statement, the flight attendants' union called the proposed cuts "disastrous" and promised to fight the company "over every dime."

Apart from ending the pension plan, United is asking flight attendants for almost $138 million annually in new concessions.

United Chief Executive Glenn Tilton told employees last week that the industry had been hit hard by high fuel costs and low fares, and that it needed to save an additional $2 billion a year, on top of $5 billion in cuts already planned.

One third of the new savings would come from labor costs, a second third from pension replacements, and the rest from non-labor cuts. Tilton said that he and seven other executives would take 15 percent pay cuts.

United hopes it will be able to negotiate with the unions representing pilots, machinists, mechanics and flight attendants for consensual agreement on the cuts, said Jean Medina, United spokeswoman. United asked the bankruptcy court to set hearings in case the unions can't reach agreement with the airline.

"They have to go to the bankruptcy court to make the request, and show that the plan is necessary for its survival," said Randy Clerihue, spokesman for Pension Benefit Guaranty Corp., a federal agency that acts as a safety net for company pension plans.

The PBGC said in August it would be liable for $6.4 billion in pension obligations if United ends all four plans, which cover 119,000 workers and retirees. Since the plans are underfunded by $8.3 billion, workers and retirees could lose $1.9 billion in benefits, the PBGC said.

United has disputed this, saying the agency would only have to cover about $1.7 billion, and that most retirees would see no reduction in their payments.

The PBGC said in August that covering United's obligations could endanger other plans covered by the insurance program.

"There's a lot of concern that the PBGC is overextended," said Michael Kushner, an employee benefits attorney with Coudert Brothers in New York.

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