A choppy flight from bankruptcy
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UNITED Airlines is revving up for a financial takeoff from bankruptcy. It says all it needs is one last break, and it’s a doozy. After thousands of layoffs and $2.5 billion in pay cuts, United wants workers to take another hit. The airline has convinced a federal agency to take over pension bills for 60,000 retirees, essentially trimming the workers’ pension benefit by a quarter. A bankruptcy judge blessed this deal, setting the stage for United to cut pensions due to its current 61,000 workers. At some point, the question occurs: Why would anyone work for United? Pension and pay contracts don’t mean a thing when the turnaround team tries to revive this airline. Washington is averting its eyes. The White House has taken a strict free- market line, letting the air-travel market separate the winners from the losers. Few in Congress want to extend billions in loans to a sick industry that has lost $30 billion in five years. For all the pain and confusion caused by airline deregulation in the 1970s, there is zero political will to go back to the days of fewer choices and higher prices. Once the biggest airline, United now has fallen the farthest. There are too many things wrong to isolate a chief flaw: high wages, soaring fuel costs, competition from low-cost rivals, a slow economy and travel Web sites that make it easy to grab the cheapest fares. United has fought back by launching Ted, its own discount airline, putting more planes on profitable runs to Vietnam and China, and instituting tougher work rules. But a huge problem remains, one felt by other corporations: pension obligations that aren’t backed by company bank accounts. Delta, the country’s No. 3 airline, could join United in dropping its pension burden. Thirty years ago, employers kicked in yearly payments to create a federal agency to guarantee pensions. The idea was all good intentions: If a company went belly up, the agency would take over most pension payments so that retirees wouldn’t suffer. But, despite the intent, this mission is getting twisted. Beginning with Bethlehem Steel in 2002 and now United, managers are using the agency to off- load billions in pension bills. For United, the sum is $9.8 billion. With a lighter balance sheet, United can bounce out of bankruptcy and never look back. There’s no question that the airline industry is undergoing a brutal shakeout. A bankruptcy court may be one way to strip down operations and survive. But the laws shouldn’t be used to dodge pension promises. |