Pension Promises: Trust or Bust?

We all know about the filing of bankruptcy and conceivable plight for at least two of the six major carriers in the U.S. We are all aware of the extremely high fuel costs (over $46 a barrel at the time of this writing) that the airline industry has been facing. We all know that airlines all over the world have been finding creative ways to cut costs to stay afloat for at least the last three years. And, if we know anything about the psychology of relationships, we all know that they are built on a foundation of trust , the words "till death do us part" should not mean "when times get tough, I'm outta here."

Is this what United is saying to their employees by declaring they would discontinue contribution to pension plans and may even jettison some, if not all of the $13 billion in pension obligations, claiming this is the only way to attempt to emerge from bankruptcy? Is this what Delta is telling its pilots when they asked them for a 35 percent pay cut and proposed a smaller pension plan? Is this what U.S. Airways wants to say to their workers when they "hint" about taking similar action with their pensions?

Perhaps it is. Yet in a relationship, it takes two (maybe three) to tango. There are compromises, concessions, and in this case, political bargaining between the employer and the union, predicated on a long-term commitment. Yes, United has currently halted their pension contribution of $568 million while in bankruptcy, but what choice do they have? Costs are much higher for the majors than for the low-cost carriers. True, theirs is a business model that is quickly becoming antiquated and they no longer have the credibility to charge a premium for reputation, brand name and superior service. But let's not forget that just four years ago, in the summer of 2000, the other half of the relationship, United pilots, staged slowdowns that ultimately forced management to set a poor precedent in the industry with an enormous pay raise in what some considered an already inflated pilot salary. Other airlines succumbed to similar moves. Soon thereafter costs were spiring, leaving the legacies with overpaid employees, inefficient work rules and higher fuel costs (the majors could not hedge fuel prices) at a time when there was an onslaught of low-cost carriers able to provide the same service at much lower prices.

So who is right and who is wrong? Maybe there is a via media. Instead of airlines breaking contracts ( covenant, pledge, promise) and losing trust from their employees and in turn, workers suing their organizations and retiring early, why not demand sacrifices from the shareholders, those who entered the relationship as part-owner with full knowledge that there are always risks (chance of loss) attached?

Thank you for reading.