- The Washington Times - Saturday, February 22, 2003

US Airways told a bankruptcy judge yesterday that the company faces almost imminent liquidation if it is not permitted to terminate the pension plan for its 6,000 pilots.
The bankrupt Arlington airline faces a $1.6 billion gap over the next seven years between its pension assets and its liabilities, the company said. Resolution of the issue is the last major hurdle it faces to meet its goal of emerging from bankruptcy by the end of March.
The seventh-largest U.S. carrier has asked U.S. Bankruptcy Judge Stephen Mitchell for permission to end the plan as of March 31, saying last month that it can't make $2 billion in pilot payments due over the next seven years.
A lawyer for the carrier told Judge Mitchell yesterday that the pension issue is preventing the company from accessing the final $200 million of a $500 million bankruptcy loan from Retirement Systems of Alabama. As a result, US Airways Thursday missed payments totaling $19.7 million on debt related to five Airbus A330 airplanes.
"If we can't access the liquidity we need, this case will fail," US Airways bankruptcy lawyer Jack Butler of Skadden Arps Slate Meagher & Flom, told Judge Mitchell at a court hearing. "There is no way this company will ever pay the pension benefits at issue."
But the pilots, who have suffered 1,800 furloughs and already have agreed to $565 million in annual wage concessions to try to keep the company afloat, say termination of their pension is too much to bear. Nearly 100 pilots attended yesterday's hearing to show their displeasure.
"We have already sacrificed a lot," said Bob Lamborn of Kennett Square, Pa., a US Airways pilot for 17 years. "To have them come after our pension now, it's a personal affront."
If US Airways gets what it wants, the federal Pension Benefit Guaranty Corp. will take over the plan. In that case, most pilots would receive a pension no greater than $28,500 a year.
That would be supplemented with a new, replacement pension plan implemented by the airline. But the new pension plan would provide defined contributions instead of defined benefits. That means an older pilot would have little time to accumulate savings, while younger pilots would have to hope for a strong stock market to build a significant nest egg.
If the old plan were to remain intact, most pilots would receive an annual pension of $50,000 to $70,000. Some are in line to receive $100,000 or more.
Pilot Dave Ciabattoni of Wallingford, Pa., estimated that his overall pension at best will be cut in half under US Airways' proposal. He said he did not believe the company's assertion that resolving the pension issue is the airline's final hurdle to financial stability.
"If the difference between solvency and liquidation is this issue, then the company is going to liquidate," he said. "The pilots alone can't save this company."
Many pilots said they also resent the fact that none of the other unions are being asked to sacrifice their pensions. The airline says the pilots' plan is the only one big enough to provide the savings it needs.
Mr. Butler said he sympathizes with the pilots, but terminating the plan is necessary to the airline's survival.
"These pilot benefits will never be paid at those [original] levels. They are gone and nobody will get them," he said. "If we do not resolve this issue on a timely basis, there will be no airline."
The Retirement Systems of Alabama, a pension fund for public employees in that state, is the airline's main financial sponsor and is in line to take a controlling stake in the airline upon its emergence from bankruptcy.
The airline won a small victory yesterday when Judge Mitchell agreed to hear testimony on the issue. Lawyers for several groups of retired pilots had contended that the judge did not have authority to rule on the issue and that it should be submitted to arbitration.
Testimony is expected to continue next week, with witnesses including US Airways Chief Executive David Siegel.

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