16 August 2004
UAL Bankruptcy and Pensions
The restructuring of UAL is in the hands of its employees because of federal regulation of its pension obligations. The unions that represent UAL’s workers essentially have to choose between keeping their jobs, by allowing the airline to survive, and keeping their pensions, under the guarantee of the Pension Benefit Guarantee Corporation. A PBGC-approved bankruptcy reorganization would probably result in the sale of UAL to a rival airline for pennies on the dollar and at a drastic reduction in the size of its operations.
It is wrong to blame the PBGC for enforcing the rules it was given by the legislation that set it up. It must assume the letter of the pension obligations undertaken by a qualified company that can no longer operate so as to fulfill them. Whether UAL can operate in a way that fulfills its pension obligations is up to its employees. In effect, they must consent to a modification, or reduction, of those obligations if they want their jobs to continue.
Sometimes, life presents hard choices. A few UAL employees may not be vested in their pension plans. Many expected to build up their pension nest-eggs through longer periods of employment than may be likely in a bankruptcy reorganization. Current employees may resent the fact that they are jeopardizing their jobs for the sake of retirees. Those are the breaks.
The restructuring of UAL is in the hands of its employees because of federal regulation of its pension obligations. The unions that represent UAL’s workers essentially have to choose between keeping their jobs, by allowing the airline to survive, and keeping their pensions, under the guarantee of the Pension Benefit Guarantee Corporation. A PBGC-approved bankruptcy reorganization would probably result in the sale of UAL to a rival airline for pennies on the dollar and at a drastic reduction in the size of its operations.
It is wrong to blame the PBGC for enforcing the rules it was given by the legislation that set it up. It must assume the letter of the pension obligations undertaken by a qualified company that can no longer operate so as to fulfill them. Whether UAL can operate in a way that fulfills its pension obligations is up to its employees. In effect, they must consent to a modification, or reduction, of those obligations if they want their jobs to continue.
Sometimes, life presents hard choices. A few UAL employees may not be vested in their pension plans. Many expected to build up their pension nest-eggs through longer periods of employment than may be likely in a bankruptcy reorganization. Current employees may resent the fact that they are jeopardizing their jobs for the sake of retirees. Those are the breaks.
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