Pensions of some pilots halted by United
By Mark Skertic
Tribune staff reporter
Published February 10, 2005
United Airlines is suspending a portion of the pension payments made to some former pilots and their widows, a move that will cost many 30 percent or more of their retirement income.
The bad news for retired pilots came at the same time that the airline announced it was calling back 150 laid-off pilots to fill vacancies. The move will leave the carrier with 1,983 on furlough, according to the pilots union.
Anticipated retirements fueled the need to bring back some furloughed pilots, said United spokesman Jeff Green. The airline will bring back 75 in the spring and another 75 by the end of the year, he said.
That good news was tempered by the decision to halt immediately the pension program that benefits about half the airline's retired pilots and their surviving spouses.
The move was made pending the outcome of legal action brought by the federal Pension Benefit Guaranty Corp., Green said. The program costs United $6 million a month.
That works out to an average payment of about $2,000, though a representative of the retired pilots said the amount varies widely.
The suspension brought an angry response from the Air Line Pilots Association, the union representing current pilots, and the United Retired Pilots Benefit Protection Association.
Mark Bathurst, union chief for the current pilots, called the company's action "unacceptable," and said in a letter to members that it violated the recently ratified contract.
The retired pilots will seek an emergency motion forcing United to resume the payments, said Roger Hall, president of the group. "Our reading of the law is United cannot unilaterally and arbitrarily do what they've done," said Hall, 66, a pilot for 34 years who estimates that his monthly pension benefit will be reduced by about a third. "This is typical of the callous way they've treated retirees. They just don't care."
Ken Bradley, who retired four years ago after 35 years of flying for United, said, "I just lost about a third of my income out of the clear blue sky," and added that he was among those angered by the impersonal tone of the letter United sent announcing the program's suspension that began "Dear Participant."
"They don't even know my name?" he said. "There's an arrogant indifference to people who worked there all those years. It's a moral bankruptcy."
Elk Grove Township-based United has been mired in Chapter 11 bankruptcy protection since December 2002. United has argued it needs to eliminate its employee pension programs to achieve financial stability. It wants to replace them with less costly employee-contribution programs, such as a 401(k).
In December, United's efforts to kill its pension programs prompted an unusual move by the PBGC. It argued in bankruptcy court that it should be allowed to immediately take over the pilots' pension program because that would prevent about $140 million in additional obligations from accruing.
It would also eliminate what United and the pilots refer to as the "non-qualified pension benefits," the plan the carrier suspended Wednesday. Such programs are common for pensions that are paid to individuals who had high-paying jobs. Federal rules cap the tax benefits a company gets for defined-benefit pension payments. Non-qualified benefits exceed that ceiling.
It is still an obligation the company has to its former workers, Bradley said. "It's still deferred compensation," he said. "It was earned during your career."
United told the pilots it will make any missed payments if the bankruptcy court turns down the pension agency's request. If the court approves the request, the move would be retroactive to December.
The non-qualified benefits could still disappear permanently. United's recently renegotiated contract with the pilots union allows the airline to terminate the pilots' pension plan after April 11.