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New United Air Wins Right to Default on Its Pension Plans
[link|http://www.nytimes.com/2005/05/11/business/11air.html?hp&ex=1115870400&en=9b9ae0ca7d8254b4&ei=5094&partner=homepage|http://www.nytimes.com/2005/05/11/business/11air.html?hp&ex=1115870400&en=9b9ae0ca7d8254b4&ei=5094&partner=homepage]

"United Airlines, which is operating in bankruptcy protection, received court permission yesterday to terminate its four employee pension plans, setting off the largest pension default in the three decades that the government has guaranteed pensions.
...
The federal agency that guarantees pensions, the Pension Benefit Guaranty Corporation, will assume responsibility for the plans, which cover about 134,000 people."
New Naturally
the pension plans for all of the executives remain unscathed.

It REALLY is time for the revolution to begin.
lincoln
"Until the revolution, we are only useful for our private information and our money."
[link|mailto:bconnors@ev1.net|contact me]
New It's starting...
...this could have much bigger ramifications than anyone has realized.

The pension fund that United's pension gets turned over to is already 21 billion in the hole. They're already talking about cutting current retirees pensions, but there's no news about what it would take to kill this new pension (or what happens if it does).

So, let's extrapolate a bit...current retirees who were guarentee X dollars are now receiving less. Given W's notes that if people don't have money, they don't spend it...I see a lot of retirees not spending any money and who may need some dole to keep them going.

More of a burden to the government - less to the economy.

And this STILL doesn't fix United. They're still on the edge and only need a change in fuel prices and interest rates to give them a really hard time.
New United is out of it, we taxpayers will pickup the tab
Just like the savings and loan scandals. When pensions were flush with stock bubble money companies quit paying in. As for private social security accounts, if the major airline companies cant do it, how does mom and pop figure it out?
thanx,
bill
All tribal myths are true, for a given value of "true" Terry Pratchett
[link|http://boxleys.blogspot.com/|http://boxleys.blogspot.com/]

Any opinions expressed by me are mine alone, posted from my home computer, on my own time as a free american and do not reflect the opinions of any person or company that I have had professional relations with in the past 48 years. meep
questions, help? [link|mailto:pappas@catholic.org|email pappas at catholic.org]
New It's pretty simple, really.
1) Private company starts pension system.
2) Private company declares bankruptcy. Thanks to [link|http://www.pbgc.gov/about/hptext.htm|PBGC], the Federal Government takes up the obligation.
3) PBGC goes bust due to lack of funding.
4) Government establishes new semi-private pension guarantee system incorporating PBGC obligations. Investment banks and IT consulting corporations get windfall from their work on the new system.

Goto 1.

:-(

(You can replace "PBGC" with "Social Security" under some people's belief of Bush's vision of the future.)

I don't see a good solution to this problem. There's big problems with the major airlines. Fares are too low for their cost structures. As long as some of them are sticking around with bankruptcy protection, they have cost advantages over the other majors, putting more pressure on them. A couple of them being liquidated would help the other majors, in the short run. But in the long run, Southwest will win.

There probably needs to be a transition to a Southwest-like pricing structure among the majors (or they need to find another business model that lets them compete on something other than price), but it's not going to happen without a lot of pain (and not without them shedding a lot of their labor contracts and other obligations).

The idea of guarantees for defined-benefit pensions sounds nice, but if the insurance payments to the guarantee agency can't keep the system solvent, then something has to change. Either change the pension to a defined contribution plan (and somehow grandfather in the retirees or near-retirees), raise the insurance fees on the industry (and put even more pressure on the surviving companies), or treat pensions as one of or the most important creditor in bankruptcy proceedings, or something.

Nobody should be surprised by the PBGC being used this way.

Cheers,
Scott.
New partial solution would be that under bankrupcy
procedings that if pension obligations are to be breached all executive and and negotiated pensions with officers are rolled into the breached obligation and transfered to the Pension Trust. If written into bankrupcy law all future ceo's etc would have to face that issue and all claims of negotiated settlements with chief executives wouldnt mean squat.
thanx,
bill
All tribal myths are true, for a given value of "true" Terry Pratchett
[link|http://boxleys.blogspot.com/|http://boxleys.blogspot.com/]

Any opinions expressed by me are mine alone, posted from my home computer, on my own time as a free american and do not reflect the opinions of any person or company that I have had professional relations with in the past 48 years. meep
questions, help? [link|mailto:pappas@catholic.org|email pappas at catholic.org]
New Bingo! Shared pain would make them think twice.
Unfortunately, they'll find ways to set up "personal retirement accounts" for the execs that are not a part of any pot.
Alex

The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt. -- Bertrand Russell
New nope, already limits on erisa, ira and 401k's
they want money after retirement, the retiree's get theirs first.
thanx,
bill
All tribal myths are true, for a given value of "true" Terry Pratchett
[link|http://boxleys.blogspot.com/|http://boxleys.blogspot.com/]

Any opinions expressed by me are mine alone, posted from my home computer, on my own time as a free american and do not reflect the opinions of any person or company that I have had professional relations with in the past 48 years. meep
questions, help? [link|mailto:pappas@catholic.org|email pappas at catholic.org]
New For pre-tax funds what you say is true.
But, execs can use after tax money for annuities, convertible insurance policies and such and get professional help in setting them up. It's more costly to the company, but what the hell?
Alex

The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt. -- Bertrand Russell
New with the new rules on board fiducary responsibilities
I couldnt see a board doing that.
thanx,
bill
All tribal myths are true, for a given value of "true" Terry Pratchett
[link|http://boxleys.blogspot.com/|http://boxleys.blogspot.com/]

Any opinions expressed by me are mine alone, posted from my home computer, on my own time as a free american and do not reflect the opinions of any person or company that I have had professional relations with in the past 48 years. meep
questions, help? [link|mailto:pappas@catholic.org|email pappas at catholic.org]
New Or they'd just collect their gold before bankruptcy, no?
New worldcom execs are going to jail for that
All tribal myths are true, for a given value of "true" Terry Pratchett
[link|http://boxleys.blogspot.com/|http://boxleys.blogspot.com/]

Any opinions expressed by me are mine alone, posted from my home computer, on my own time as a free american and do not reflect the opinions of any person or company that I have had professional relations with in the past 48 years. meep
questions, help? [link|mailto:pappas@catholic.org|email pappas at catholic.org]
New I mean things like Carly's golden parachute.
CEO sees company going down the tubes, decides to resign (or is pushed) and collects his/her golden parachute (say a lump-sum and a pre-paid annuity in his/her name) that s/he signed when the company was flush with cash and prospects. 6-12 months later, his/her replacement has to file bankruptcy. S/He gets nothing, but the previous head of the company - who may have had much more to do with the situation than the later manager - gets millions. And note that I'm not assuming any fraud - that's a different issue.

How would you handle situations like that? Go back a year? 2 years? 5 years? Forbid immediate severance packages for managers? Just have a judge grab everything and force him/her to sort it all out?

I don't know. But it seems to me that if the company doesn't control an asset any more (e.g. a former CEO's annuity) then the bankruptcy of the company shouldn't affect it. Even though it might be terribly immoral, in many ways, to let that happen.

I don't think there's any way that a system could be structured so that a company's present and immediate past management and the retirees could be handled transparently in a bankruptcy proceeding that couldn't be manipulated by clever lawyers. And multimillion dollar CEOs can certainly afford clever lawyers.

My $0.02.

Cheers,
Scott.
New perhaps the annuity should be owned by the company
with the payee the corporate exec. That way its a company asset and available to settle company debt. If the company could not write the payments off if not done that way might force some compliance.
thanx,
bill
All tribal myths are true, for a given value of "true" Terry Pratchett
[link|http://boxleys.blogspot.com/|http://boxleys.blogspot.com/]

Any opinions expressed by me are mine alone, posted from my home computer, on my own time as a free american and do not reflect the opinions of any person or company that I have had professional relations with in the past 48 years. meep
questions, help? [link|mailto:pappas@catholic.org|email pappas at catholic.org]
New Good idea...And the chances of the Neocon Congress
doing this are about the same as me winning the lottery without buying a ticket! In fact, /me expects to see any legislation coming out of this to specifically exclude top executives and directors.

But, you're right...your idea would serve to pause the mad rush to cancel all pensions for miles around....
jb4
shrub\ufffdbish (Am., from shrub + rubbish, after the derisive name for America's 43 president; 2003) n. 1. a form of nonsensical political doubletalk wherein the speaker attempts to defend the indefensible by lying, obfuscation, or otherwise misstating the facts; GIBBERISH. 2. any of a collection of utterances from America's putative 43rd president. cf. BULLSHIT

Expand Edited by jb4 May 12, 2005, 04:25:55 PM EDT
New If Southwest wins, you lose...big
First.One of the major reasons SW makes money is it only flys where many more people go than they >will< serve. By "cherry-picking" profitable markets from the majors it simply leaves the burden to the network carriers to serve Paducah and other smaller markets. If SW model propogates, many people will not have access to a convenient airport at all.

In addition, SW has no mortgage. No airports. All of the majors have sunk hundreds of millions into airport facilities. Sure the cities throw in money too..but in the case of Philly, for example, US Airways spends 400 million on renovations and a new international terminal...and the mayor repays them by giving breaks to SW to come in to 6 gates vacated my American...because "competition is good". What they will discover is how bad the impact can be if US Airways goes away. Just ask Pittsburgh.

What the majors haven't figured out is that 1) they cannot compete on cost basis and 2) they shouldn't even try.

The governments need to understand that giving gates away to enhance "competition" isn't fair to the companies that help build and maintain those gates.

And yes...the unions have to give up some very lucrative contracts that have baked into them some really interesting sets of work-rules. Most importantly, though, these contracts need to change so the airlines can better impact their ability to serve the customer. Gate agent rude to you? Can't be fired or disciplined by the airline. Has to be done by the union.

The airlines are a mess. But it will be alot bigger of a mess of UA or one of the top 4 outright fail.
If you push something hard enough, it will fall over. Fudd's First Law of Opposition

[link|mailto:bepatient@aol.com|BePatient]
Expand Edited by bepatient May 12, 2005, 07:15:19 AM EDT
New Yeahbut...
You make good points.

I think the way the airport gates are run is very short sighted. A city should own the airport - gates and all. There should be an annual contract with a carrier. That way they could have fair leverage with the carriers (and vice versa) as time goes on. Forcing carriers to dump billions into the airports to save the city money on them ties them together too tightly, IMO. It may save some tax money, but it removes flexibility and competition.

It really doesn't make sense for the US to have so many airlines these days. Most countries have one or two "flag" carriers. The US has, what, 6? United, Delta, American, Northwest, Continental, USAir. They serve slightly different markets, but are all products of a system constructed when there was little competition between them and the government effectively set the fares. That doesn't work any more. They've got to change. We agree that they should compete on more than price.

There would be a painful transition if a few of them went bust. Some towns and cities would no longer have regular jet service. For a while. But there, ideally, would be nothing preventing the rise of new regional point-to-point airlines or charters or sky taxis. Used jets should be cheap if a major or two fails. The market should be allowed to work its magic, no? ;-)

Of course, if restrictions on general aviation remain in place, then it will be very difficult for new, smaller airlines to fill that niche. :-(

Cringely has an interesting article on just this topic: [link|http://www.pbs.org/cringely/pulpit/pulpit20050505.html|DayJet].

Cheers,
Scott.
New Keep in mind
with very few exceptions those "national" carriers in other countries were serving areas roughly the size of a medium US state. So while there may not be room for 6 major carriers...there certainly is room for more than one.

I happen to agree on the ownership of airports being the obligation of the city but maybe for different reasons. Why argue the point over semantics, though.

The issue with any carrier filling the niche is the passenger experience. Imagine trying to get from albany to reno on a series of point to point flights where each carrier is different, bags have to get transferred across 3-6 carriers, interlining of tickets needs to happen in case one flight gets cancelled or delayed.

It is a nightmare scenario in a world where travel is already a bad dream for many.

The fed blocked a US/UA merger once. It very well might have saved them...and it would have forced the industry into this rationalization that much sooner...and would have done it when jet fuel was affordable.
If you push something hard enough, it will fall over. Fudd's First Law of Opposition

[link|mailto:bepatient@aol.com|BePatient]
New I still maintain...
that after 9/11 the government should have picked up the entire cost of the planes that got destroyed, paid the expenses due to shutting down air travel, and paid for security upgrades.

And nothing else.

This would have kept insurance rates from going up. And would have driven at least one carrier out of business.

Instead we let insurance rates rise, and wrote a big check that subsidized the ongoing airline price war without changing the outcome that at least one carrier will go out of business.

Cheers,
Ben
I have come to believe that idealism without discipline is a quick road to disaster, while discipline without idealism is pointless. -- Aaron Ward (my brother)
New That would certainly have helped
Right now there's an unholy alliance forming between the finance companies and the airlines so they can continue to give miles in affinity programs and GE wants to make sure these guys all can keep leasing planes.

All of this keeps funneling money into the airlines when it shouldn't be there.
If you push something hard enough, it will fall over. Fudd's First Law of Opposition

[link|mailto:bepatient@aol.com|BePatient]
New I still maintain...
they shouldn't even have had to pay even that.

Bleah.

If a drunk driver hits my car, I do NOT sue the state. It's ludicrious.

But we let businesses get away with this crap....and then wonder why we're hit in the pocketbook.
New Disagree
It is in the public interest that airplane insurance rates not skyrocket. Avoiding that by taking care of it up front is cheaper than having insurance companies have to try to calculate the risk and charge a healthy premium to guarantee profit on top of that.

Shutting down airplanes and forcing new security measures can both be seen as a public taking. I'm not saying that a court would see it that way, but I do, and think that the government should pay for public takings.

Hence everything that I thought the government should pay for I had reasons why they should pay. Everything else though...?

Cheers,
Ben
I have come to believe that idealism without discipline is a quick road to disaster, while discipline without idealism is pointless. -- Aaron Ward (my brother)
New Counterexample: PanAm (version II)
Has its "hub" in ... Gary, Indiana (airport code: GYY).

Why not Paducah?
jb4
shrub\ufffdbish (Am., from shrub + rubbish, after the derisive name for America's 43 president; 2003) n. 1. a form of nonsensical political doubletalk wherein the speaker attempts to defend the indefensible by lying, obfuscation, or otherwise misstating the facts; GIBBERISH. 2. any of a collection of utterances from America's putative 43rd president. cf. BULLSHIT

New Thats V3
V2 was Raliegh-Durham I think
If you push something hard enough, it will fall over. Fudd's First Law of Opposition

[link|mailto:bepatient@aol.com|BePatient]
New Speculation that GM may use PBGC too.
General Motors might join United [link|http://www.washingtonpost.com/wp-dyn/content/article/2005/05/12/AR2005051202006_pf.html|too]:

BALTIMORE -- Robert Fitch, a 60-year-old sanitation worker for General Motors, will lose his job today when the company closes its van factory near the city's industrial port. But under his United Auto Workers contract, Fitch will get his full pay and benefits for two more years, which will cover medical bills for his seriously ill wife.

"I always felt safe there," Fitch said this week as he neared the end of 39 years on the job.

The cost of supporting workers like Fitch is one reason GM's finances are a wreck and its bonds have sunk to junk status. The company also has too many old products and too many old factories, the legacy of its long run as the world's biggest automaker. As overseas rivals such as Toyota and Honda grow stronger in the United States, GM's plight only gets worse.

[...]

As GM's market share continues to go down, though, it burns cash faster. Now that Standard & Poor's has cut the company's bond rating below investment grade, GM will have a hard time borrowing more money. Ultimately that predicament could lead to bankruptcy, although the company points out that it has significant cash on hand.

One solution could be to follow the example of the U.S. steel industry, which cut health benefits for retirees and jettisoned pensions to the government's Pension Benefit Guaranty Corp. Many Baltimore workers know that is possible but refuse to believe it could happen to them.

"I don't think they're really in financial trouble," said Hollis, the 42-year plant veteran. "General Motors will do okay."

Others are less sure. "I can't say in five years my pension won't get cut off," Hellmig said. "I don't know. You can only hope it will last."

[...]


Cheers,
Scott.
New GM: shades of UK nee 'GB', after WW-II
Old, worn-out machines not replaced by Marshall Plan gratuities (and they also had to pay for much of the early Lend-Lease stuff acquired from US before December 7, '41).

As to any prognosis.. no Idea; who Knows what goes on in the mind-fluff of a US CIEIO (beyond unbridled personal greed, of course?)


moi
New Ah yes, the S&L debacle
Yet [link|http://www.sptimes.com/News/102900/Business/Influence_and_bailout.shtml|another] [link|http://www.campaignwatch.org/more1.htm|Bush] [link|http://www.informationclearinghouse.info/article3255.htm|Family] [link|http://www.informationclearinghouse.info/article3330.htm|disaster] for [link|http://www.motherjones.com/news/outfront/1994/03/pizzo.html|Taxpayers].

Brought to you by yet another SOB (Son Of Bush).



"Whenever you find you are on the side of the majority, it is time to pause and reflect"   --Mark Twain

"The significant problems we face cannot be solved at the same level of thinking we were at when we created them."   --Albert Einstein

"This is still a dangerous world. It's a world of madmen and uncertainty and potential mental losses."   --George W. Bush
New I understand, but this still gripes my A**.
To be sure the suits at United should be culled (but you could say that about any BOD for any Corporation). But here's the thing that gives me a little pause. Air travel is infrastructure. We all want to fly from New York to LA for under 300 bucks. With the robber oil barons (read: people like the Prez and Veep) the airlines can barely afford to fly coast-to-coast with more than 10 seats open. Now, the poor sob's that worked for United do NOT deserve to be punished. And to my way of thinking, if Iraq is worth 300 Billion over three years then surely, surely those people who worked for United are worth 3.
bcnu,
Mikem

Eine Leute. Eine Welt. Ein F\ufffdhrer.
God Bless America.
New Tom Toles comic from 5/15/2005. 60 kB .gif
[image|http://www.washingtonpost.com/wp-srv/style/comics/images/Toles/20050515.gif|0|Why Can't You Be Profitable Like the Airlines or GM?|381|454]

Yup.

Cheers,
Scott.
     United Air Wins Right to Default on Its Pension Plans - (bluke) - (28)
         Naturally - (lincoln) - (25)
             It's starting... - (Simon_Jester) - (24)
                 United is out of it, we taxpayers will pickup the tab - (boxley) - (23)
                     It's pretty simple, really. - (Another Scott) - (21)
                         partial solution would be that under bankrupcy - (boxley) - (9)
                             Bingo! Shared pain would make them think twice. - (a6l6e6x) - (7)
                                 nope, already limits on erisa, ira and 401k's - (boxley) - (2)
                                     For pre-tax funds what you say is true. - (a6l6e6x) - (1)
                                         with the new rules on board fiducary responsibilities - (boxley)
                                 Or they'd just collect their gold before bankruptcy, no? -NT - (Another Scott) - (3)
                                     worldcom execs are going to jail for that -NT - (boxley) - (2)
                                         I mean things like Carly's golden parachute. - (Another Scott) - (1)
                                             perhaps the annuity should be owned by the company - (boxley)
                             Good idea...And the chances of the Neocon Congress - (jb4)
                         If Southwest wins, you lose...big - (bepatient) - (8)
                             Yeahbut... - (Another Scott) - (5)
                                 Keep in mind - (bepatient) - (4)
                                     I still maintain... - (ben_tilly) - (3)
                                         That would certainly have helped - (bepatient)
                                         I still maintain... - (Simon_Jester) - (1)
                                             Disagree - (ben_tilly)
                             Counterexample: PanAm (version II) - (jb4) - (1)
                                 Thats V3 - (bepatient)
                         Speculation that GM may use PBGC too. - (Another Scott) - (1)
                             GM: shades of UK nee 'GB', after WW-II - (Ashton)
                     Ah yes, the S&L debacle - (tuberculosis)
         I understand, but this still gripes my A**. - (mmoffitt)
         Tom Toles comic from 5/15/2005. 60 kB .gif - (Another Scott)

The mass production of beer is the greatest thing since sliced bread.
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