United Pensions Taken Over

March 12, 2005
The federal agency that guarantees pensions said Friday that it is taking over the retirement plans of 36,000 United Airline employees.

The federal agency that guarantees pensions said Friday that it is taking over the retirement plans of 36,000 United Airline employees -- including thousands in the Bay Area -- in a move that could cost the workers up to $200 a month in benefits, according to their unions.

The Pension Benefit GuarantyCorp. announced it was assuming control of pensions for United's mechanics, baggage handlers and other employees because United has only $1.2 billion in assets to cover the $4.2 billion in benefits it promised them.

Of the $2.9 billion shortfall, the federal agency will only guarantee $2.1 billion. Moreover, by taking over the pension plans now, the federal agency avoids having to guarantee an additional $227 million in benefit increases that would have begun taking effect Monday.

The federal agency in December took over the pensions of more than 14,000 active and retired United pilots. And it had been widely expected to assume responsibility for more United pensions, given the company's repeated claims that it can't afford the plans.

Even so, the agency's announcement Friday was a blow to the approximately 10,000 active and retired United mechanics and other so-called ground workers covered by the affected pensions locally.

''We're not happy, that's for sure,'' said Joseph Prisco, president of the Airline Mechanics Fraternal Association's Bay Area local. Noting that his members have suffered considerable stress due to the industry's financial troubles, he added, ''this is just one more smack from Uncle Sam. But I still blame United Airlines, because they didn't fund these plans.''

His union's national office issued a statement vowing ''to fight this injustice in the court system,'' although it was vague about how it intended to do that.

The International Association of Machinists and Aerospace Workers -- which represents baggage handlers, food-service employees and security personnel, among others -- also lambasted the airline.

''United's deliberate course of action and absence of concern for its employees is directly responsible for the pension crisis we are facing today,'' the union said in a statement. ''Instead of terminating pensions, maybe we should explore terminating the employment of United's top management, who have mired the company in bankruptcy for two years.''

The machinists' union plans to meet with officials from United and the pension agency Monday to discuss possible ways of preserving all of its members' benefits. Many who belong to the union in the Bay Area hope something positive emerges from that session, said Carl Finamore, president of the machinists local here.

''The members for two years have endured one constant thing like this after another, one shock after another,'' he said. ''So they're very apprehensive.''

United spokeswoman Jean Medina acknowledged that the company needs the federal agency's financial help.

''We believe we need to terminate and replace all our pension plans,'' she said.

But she said the company was reserving judgment about the agency's decision Friday until it reviews the matter, adding, ''we believe it's best to resolve our pension issues at the bargaining table.''

Partly because of airline bankruptcies, the Pension Benefit Guaranty Corp.'s shortfall has more than doubled -- from $11.5 billion in 2003 to $23.5 billion last year. Fears of additional airline failures have prompted concern that the agency's financial problems eventually could necessitate a multibillion-dollar bailout by taxpayers.