Latest From United Airlines
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Latest From United Airlines
December 16, 2004
Dear Fellow Pilot,
Today, following months of analysis, study and deliberation of United Airlines' current legal and financial situation, the United MEC unanimously accepted and endorsed for your ratification a tentative agreement with the Company in lieu of the Company's Section 1113 term sheet proposal. It was a decision which none of the MEC members reached lightly, and it came only after the group realized that a negotiated settlement - not a litigated outcome - best serves you and your career.
All of you are well aware of the challenges the past two years have brought to our pilot group. Losses in revenue and oil prices still at or higher than envisioned in the 2005 and 2006 UAL business plan have dealt a crippling blow to an airline already beleaguered by financial instability.
Following the ratification and implementation of a Restructuring Agreement in May 2003 which brought dramatic wage cuts and changes to our work rules, the last thing we expected or desired was the prospect of another round of concessionary negotiations. Current economic realities that place our Company in a precarious financial situation required the MEC to make this difficult decision.
We were faced with a difficult choice regarding the Company's 1113 term sheet: negotiate with the Company to reach a consensual agreement that would inevitably involve further concessions or proceed in the bankruptcy court where we faced a dangerous risk of an imposed, and totally unacceptable, outcome. Your MEC, following careful study and analysis, determined that the responsible approach to protecting what we have left in our current collective bargaining agreement was to enter into a consensual agreement with the Company.
Included with this letter is a copy of the Tentative Agreement that the MEC endorsed, along with a summary of its contents and a comparison to the Company's term sheet. It is now up to you to determine which direction we will take regarding the Company's 1113 proposal. If you ratify this TA, it modifies the collective bargaining agreement, subject to approval of the court. If not, there will be litigation in the bankruptcy court where the company will seek to reject our current agreement. Voting will begin shortly, and will close early in January. ALPA will mail to each of you voting instructions prior to the opening of balloting.
Please study this tentative agreement carefully. We are supplying you a great deal of information to help you make an informed decision. Your council representatives will be available in operations to answer your questions. We will be conducting a series of "road shows" in each domicile over the next couple of weeks to explain this tentative agreement in greater detail, and to address your questions. We urge you to carefully monitor your e-mail and the MEC website, as new information and updates will be provided as they become available.
It is important for you to ask the necessary questions to gain a full understanding of the issues. You have an obligation to make an informed decision based on facts not emotion, speculation or rumor.
As a union, our goal has always been to do the right thing based on the circumstances we face at the time, and this situation is no different. The decisions that await us are not easy ones. But, together, we can provide the leadership to help free our Company from the crippling grip of bankruptcy and restore it to its rightful place as the world's preeminent airline. As I have said to you previously, this is your union, and your Company.
I urge you to exercise your right to decide responsibly.
Fraternally,
Captain Mark Bathurst
Chairman, UAL-MEC
------------------------------------------------
Summary of Bankruptcy Exit
Tentative Agreement
December 16, 2004
1. Contract Extension:
Contract amendable date extended 8 months until December 31, 2009,
Negotiations commence no later than May 01, 2009.
Company agreed to enhance mediation process to shorten next Section 6 negotiation.
2. Hourly Pay Rates:
Hourly rates reduced by 14.7%,
No change to current book raises of 1.5% in May 06, 07, 08, 09,
Additional 1% raise on January 1, 2008, (MEC option to convert to C fund contribution, See # 5 below.)
See Exhibit A of the TA for wage cut tables.
3. Other Contract Changes (See Exhibits B-1 and B-2):
a. ALPA Concessions:
Eliminate International Hourly Override,
Eliminate Night Premium,
Eliminate Future Retiree Life Insurance,
b. Company Concessions:
Eliminate moveable RDO's for domestic reserve assignments.
4. Defined Benefit Pension Plan:
ALPA will not oppose A Plan Termination if Bankruptcy Court determines it is required for exit,
Company will not terminate and will oppose efforts to terminate prior to the earlier of May 1, 2005 or bankruptcy exit.
5. Pension Contributions:
Current 9 % B Plan continues,
C Plan defined as an additional 6% contribution to PDAP,
Optional - the January 01, 2008 1.0% pay raise can be converted to a C Plan contribution
making it a total of 7% at the MEC's option.
If a new DB plan is started for any employee group, Pilot group has the option to continue CPlan or accept comparable plan
6. Profit Sharing See Exhibit C
7. Convertible Notes - See Exhibit D
8. Distribution Agreement - See Exhibit E
9. Additional Non-Labor Savings - The company must pursue an additional $150 million savings beyond the target amount already identified.
10. Administrative claim Pilot group reimbursed for twice the pilot group cash savings in the event of termination under paragraph 16. Claim extinguished on exit from bankruptcy provided the company's plan of reorganization is fully consistent with the TA.
11. Indemnity - See Exhibit F
12. Plan Release and Exculpation Liability exemption for negotiating the Bankruptcy Agreement.
13. Assumption of the Pilot Agreement UAL agrees to accept this agreement on exit from bankruptcy.
14. Bankruptcy Actions The Company and the Association shall mutually pursue court approval of this LOA. The Association shall support all further requests by the Company for any exclusivity extensions.
15. Conditions to Effectiveness Must meet six conditions to effect TA agreement (See Agreement).
16. Termination Rights Eight protections in which we revert to CBA 2003 if certain obligations are not met (See Agreement).
17. Fees and Expenses - See Exhibit G
18. Agreement This LOA is a final, binding and conclusive commitment between the Company and the Association.
19. Amendments; Waiver Amendments in writing only
20. Notices Legal notice requirements.
21. Counterparts Legal stipulation on signatures and documents.
22. Headings; Construction LOA language construction and interpretation rules
Exhibit A - Revised Pay Rate Tables See Agreement.
Exhibit B - Other Contract Revisions, See #3 above
Exhibit C - Profit Sharing:
Replaces current profit sharing plan
Distributed as wages (401k Deferral Optional)
Profit Sharing Pool - $10 million trigger
o 7.5% of Pre-Tax Earnings in years 2005 and 2006
o 15% of Pre-Tax Earnings thereafter
Pilot Pro Rata Share - Individual Pilot Earnings/Aggregate Employee Earnings
Eligibility Any pilot who has completed one year of service as of Dec 31st of measured year.
Payment Not later than April 30th of the following year.
Exhibit D - Convertible Notes:
$550,000,000.00 value.
Issued NLT 180 days following bankruptcy exit.
Term 15 years from issuance date
Conversion Rights Convertible notes into common stock
Notes to trade at or near face value at issuance
Allocation and mechanics of pilot allocation to be determined by the MEC
Exhibit E - Amended Distribution Agreement:
New stock allocation formula includes previous allocated amount plus an additional $300 million based on 20 months of cost savings from new agreements.
Clause to capture any proportional concession based upon the other employee groups final
agreements.
Exhibit F - Indemnity Agreement: Legal provision designed to protect the Association and its employees, agents, officers, and members from any and all claims made in connection with the Agreement.
Exhibit G - Fees and Expenses:
ALPA reimbursed for fees and expenses associated with entering into this agreement.
Payment of MEC financial advisors by the company.
MEC financial advisors to reimburse ALPA for fees and expenses incurred during the bankruptcy process.
A 1.4 MB .pdf file for United's Tentative Agreement can be down loaded here.
http://www.apapdp.org/cms/staticfile..._TA_121704.pdf
Dear Fellow Pilot,
Today, following months of analysis, study and deliberation of United Airlines' current legal and financial situation, the United MEC unanimously accepted and endorsed for your ratification a tentative agreement with the Company in lieu of the Company's Section 1113 term sheet proposal. It was a decision which none of the MEC members reached lightly, and it came only after the group realized that a negotiated settlement - not a litigated outcome - best serves you and your career.
All of you are well aware of the challenges the past two years have brought to our pilot group. Losses in revenue and oil prices still at or higher than envisioned in the 2005 and 2006 UAL business plan have dealt a crippling blow to an airline already beleaguered by financial instability.
Following the ratification and implementation of a Restructuring Agreement in May 2003 which brought dramatic wage cuts and changes to our work rules, the last thing we expected or desired was the prospect of another round of concessionary negotiations. Current economic realities that place our Company in a precarious financial situation required the MEC to make this difficult decision.
We were faced with a difficult choice regarding the Company's 1113 term sheet: negotiate with the Company to reach a consensual agreement that would inevitably involve further concessions or proceed in the bankruptcy court where we faced a dangerous risk of an imposed, and totally unacceptable, outcome. Your MEC, following careful study and analysis, determined that the responsible approach to protecting what we have left in our current collective bargaining agreement was to enter into a consensual agreement with the Company.
Included with this letter is a copy of the Tentative Agreement that the MEC endorsed, along with a summary of its contents and a comparison to the Company's term sheet. It is now up to you to determine which direction we will take regarding the Company's 1113 proposal. If you ratify this TA, it modifies the collective bargaining agreement, subject to approval of the court. If not, there will be litigation in the bankruptcy court where the company will seek to reject our current agreement. Voting will begin shortly, and will close early in January. ALPA will mail to each of you voting instructions prior to the opening of balloting.
Please study this tentative agreement carefully. We are supplying you a great deal of information to help you make an informed decision. Your council representatives will be available in operations to answer your questions. We will be conducting a series of "road shows" in each domicile over the next couple of weeks to explain this tentative agreement in greater detail, and to address your questions. We urge you to carefully monitor your e-mail and the MEC website, as new information and updates will be provided as they become available.
It is important for you to ask the necessary questions to gain a full understanding of the issues. You have an obligation to make an informed decision based on facts not emotion, speculation or rumor.
As a union, our goal has always been to do the right thing based on the circumstances we face at the time, and this situation is no different. The decisions that await us are not easy ones. But, together, we can provide the leadership to help free our Company from the crippling grip of bankruptcy and restore it to its rightful place as the world's preeminent airline. As I have said to you previously, this is your union, and your Company.
I urge you to exercise your right to decide responsibly.
Fraternally,
Captain Mark Bathurst
Chairman, UAL-MEC
------------------------------------------------
Summary of Bankruptcy Exit
Tentative Agreement
December 16, 2004
1. Contract Extension:
Contract amendable date extended 8 months until December 31, 2009,
Negotiations commence no later than May 01, 2009.
Company agreed to enhance mediation process to shorten next Section 6 negotiation.
2. Hourly Pay Rates:
Hourly rates reduced by 14.7%,
No change to current book raises of 1.5% in May 06, 07, 08, 09,
Additional 1% raise on January 1, 2008, (MEC option to convert to C fund contribution, See # 5 below.)
See Exhibit A of the TA for wage cut tables.
3. Other Contract Changes (See Exhibits B-1 and B-2):
a. ALPA Concessions:
Eliminate International Hourly Override,
Eliminate Night Premium,
Eliminate Future Retiree Life Insurance,
b. Company Concessions:
Eliminate moveable RDO's for domestic reserve assignments.
4. Defined Benefit Pension Plan:
ALPA will not oppose A Plan Termination if Bankruptcy Court determines it is required for exit,
Company will not terminate and will oppose efforts to terminate prior to the earlier of May 1, 2005 or bankruptcy exit.
5. Pension Contributions:
Current 9 % B Plan continues,
C Plan defined as an additional 6% contribution to PDAP,
Optional - the January 01, 2008 1.0% pay raise can be converted to a C Plan contribution
making it a total of 7% at the MEC's option.
If a new DB plan is started for any employee group, Pilot group has the option to continue CPlan or accept comparable plan
6. Profit Sharing See Exhibit C
7. Convertible Notes - See Exhibit D
8. Distribution Agreement - See Exhibit E
9. Additional Non-Labor Savings - The company must pursue an additional $150 million savings beyond the target amount already identified.
10. Administrative claim Pilot group reimbursed for twice the pilot group cash savings in the event of termination under paragraph 16. Claim extinguished on exit from bankruptcy provided the company's plan of reorganization is fully consistent with the TA.
11. Indemnity - See Exhibit F
12. Plan Release and Exculpation Liability exemption for negotiating the Bankruptcy Agreement.
13. Assumption of the Pilot Agreement UAL agrees to accept this agreement on exit from bankruptcy.
14. Bankruptcy Actions The Company and the Association shall mutually pursue court approval of this LOA. The Association shall support all further requests by the Company for any exclusivity extensions.
15. Conditions to Effectiveness Must meet six conditions to effect TA agreement (See Agreement).
16. Termination Rights Eight protections in which we revert to CBA 2003 if certain obligations are not met (See Agreement).
17. Fees and Expenses - See Exhibit G
18. Agreement This LOA is a final, binding and conclusive commitment between the Company and the Association.
19. Amendments; Waiver Amendments in writing only
20. Notices Legal notice requirements.
21. Counterparts Legal stipulation on signatures and documents.
22. Headings; Construction LOA language construction and interpretation rules
Exhibit A - Revised Pay Rate Tables See Agreement.
Exhibit B - Other Contract Revisions, See #3 above
Exhibit C - Profit Sharing:
Replaces current profit sharing plan
Distributed as wages (401k Deferral Optional)
Profit Sharing Pool - $10 million trigger
o 7.5% of Pre-Tax Earnings in years 2005 and 2006
o 15% of Pre-Tax Earnings thereafter
Pilot Pro Rata Share - Individual Pilot Earnings/Aggregate Employee Earnings
Eligibility Any pilot who has completed one year of service as of Dec 31st of measured year.
Payment Not later than April 30th of the following year.
Exhibit D - Convertible Notes:
$550,000,000.00 value.
Issued NLT 180 days following bankruptcy exit.
Term 15 years from issuance date
Conversion Rights Convertible notes into common stock
Notes to trade at or near face value at issuance
Allocation and mechanics of pilot allocation to be determined by the MEC
Exhibit E - Amended Distribution Agreement:
New stock allocation formula includes previous allocated amount plus an additional $300 million based on 20 months of cost savings from new agreements.
Clause to capture any proportional concession based upon the other employee groups final
agreements.
Exhibit F - Indemnity Agreement: Legal provision designed to protect the Association and its employees, agents, officers, and members from any and all claims made in connection with the Agreement.
Exhibit G - Fees and Expenses:
ALPA reimbursed for fees and expenses associated with entering into this agreement.
Payment of MEC financial advisors by the company.
MEC financial advisors to reimburse ALPA for fees and expenses incurred during the bankruptcy process.
Pilots Won't Fight UAL on Pensions
Union to Get $550 Million In Convertible Notes in 2005, Setting Precedent for Others
By: SUSAN CAREY
Staff Reporter of THE WALL STREET JOURNAL
December 17, 2004
CHICAGO -- A concessionary labor contract approved yesterday by the leadership of the pilots union at United Airlines contains an unusual giveback: the Air Line Pilots Association agrees that it won't oppose United parent UAL Corp.'s efforts to terminate the group's generous defined-benefit pension plan.
The agreement is aimed at helping UAL cut expenses as it seeks to restructure under bankruptcy-court protection. In return, UAL, upon exiting from that protection next year, would issue to the union $550 million in convertible notes that the 6,600 active pilots could sell in the capital market to raise money to cover a portion of the pension shortfall they would encounter, according to the union's investment banker.
It is rare for a union to agree to give up its defined-benefit pensions for a less-lucrative plan. But the move comes as the company prepares to ask the court to dissolve its labor contracts and pension plans, unless it could reach new labor accords first. The pilots union also agreed to accept a 15% pay cut, which is in addition to at least a 30% cut in pay that took effect last year. The agreement still must be ratified by the union's membership. UAL also will be seeking cost concessions from its other unions.
The unusual concessions in the new pilots labor agreement, especially in regard to the pension plan, could serve as a template for cost savings at other airlines, which are struggling amid a persistent recession in the industry. US Airways Group Inc. entered bankruptcy-protection proceedings in September for the second time in two years. Other carriers, including Delta Air Lines and Continental Airlines, have sought concessions.
"We brought this concept to the company," said Stephen Presser, the union's investment banker. "It could be replicated for other work groups."
Union negotiators agreed to the terms of the new pact earlier this week, and the union's leadership signed off on it yesterday.
UAL hopes to foist its four pension plans on to Pension Benefit Guaranty Corp. the quasigovernmental pension insurer, which would save UAL from making more than $4 billion in contributions through 2008. The PBGC opposes UAL's plans because it says the pension debt of $8.3 billion is a legally binding obligation to UAL's 123,000 active and retired workers. However, if UAL can show the agency and the court that it couldn't survive with that financial burden, the pension agency could be obliged to take over the plans.
Among UAL employees, the pilots likely would be disproportionately harmed by the plan termination. They are the highest-paid airline employees and normally enjoy lucrative pension payments. But because, by law, they must retire at age 60, they would get much lower PBGC pension payouts. UAL's other employees, who earn less and can work until 65 or beyond, wouldn't see their pension benefits curtailed nearly as much.
"I've never seen this way of settling a pension termination," said Mr. Presser, speaking of the issuance of the notes convertible into new UAL stock. "It's a robust capital-market solution to an otherwise unsolvable pension problem."
Capt. Mark Bathurst, chairman of the ALPA branch at United, said the leadership council unanimously endorsed the agreement. He said the council recognized that United can't secure bankruptcy-exit financing without changing its cost structure. He said the convertible-note provision "will be the cornerstone in making the contract acceptable" to the members.
Defined-benefit pensions are a cherished component of compensation in many old-line companies' labor contracts. Unions tend to want to preserve those benefits as long as possible. Some unions have litigated when their plans were terminated, often in bankruptcy, and taken over by the PBGC. For ALPA, which sets the pattern for bargaining at other unions, to agree to let the plan go seems to indicate that the union understands UAL's financial predicament.
The five-year agreement now goes to the pilots for a ratification vote in early January. The group already agreed last year to $1.1 billion in annual cost savings by cutting pay and increasing productivity by 15%. This new deal provides UAL with about $180 million to $190 million more in annual savings, not including the cash savings that would accrue to UAL if it terminates the pension plan.
A seventh-year Boeing 737-300 captain would earn $118.63 an hour. That captain earned $181.93 an hour when the company filed for bankruptcy protection two years ago. Under a contract reached in early 2003, that hourly rate fell to $139.08.
UAL is asking its employees for a total of $725 million in additional wage and benefit savings, and hopes to save $639 million a year in cash from sidestepping the pension obligations and moving to cheaper defined-contribution retirement plans for its current workers. In the pilots' case, if the new contract is approved, the airline would put 6% of their annual pay into a new retirement plan. The group would continue to receive 9% of their compensation contributed to an existing 401(k)-type plan.
ALPA doesn't represent the rights of United's 6,000 retired pilots, and this tentative agreement doesn't pertain to them.
The retirees have created their own committee to fight the termination in bankruptcy court, or at least to try to soften the blow to their constituents.
UAL earlier this week imposed concessions on its salaried and management workers and is in talks with its other unions about revised contracts that would provide further savings and allow it to terminate three other defined-benefit plans. In case the unions don't agree by next month, UAL has started the legal process of asking the bankruptcy judge to allow it to annul the existing contracts so the airline can impose terms of the employees.
Union to Get $550 Million In Convertible Notes in 2005, Setting Precedent for Others
By: SUSAN CAREY
Staff Reporter of THE WALL STREET JOURNAL
December 17, 2004
CHICAGO -- A concessionary labor contract approved yesterday by the leadership of the pilots union at United Airlines contains an unusual giveback: the Air Line Pilots Association agrees that it won't oppose United parent UAL Corp.'s efforts to terminate the group's generous defined-benefit pension plan.
The agreement is aimed at helping UAL cut expenses as it seeks to restructure under bankruptcy-court protection. In return, UAL, upon exiting from that protection next year, would issue to the union $550 million in convertible notes that the 6,600 active pilots could sell in the capital market to raise money to cover a portion of the pension shortfall they would encounter, according to the union's investment banker.
It is rare for a union to agree to give up its defined-benefit pensions for a less-lucrative plan. But the move comes as the company prepares to ask the court to dissolve its labor contracts and pension plans, unless it could reach new labor accords first. The pilots union also agreed to accept a 15% pay cut, which is in addition to at least a 30% cut in pay that took effect last year. The agreement still must be ratified by the union's membership. UAL also will be seeking cost concessions from its other unions.
The unusual concessions in the new pilots labor agreement, especially in regard to the pension plan, could serve as a template for cost savings at other airlines, which are struggling amid a persistent recession in the industry. US Airways Group Inc. entered bankruptcy-protection proceedings in September for the second time in two years. Other carriers, including Delta Air Lines and Continental Airlines, have sought concessions.
"We brought this concept to the company," said Stephen Presser, the union's investment banker. "It could be replicated for other work groups."
Union negotiators agreed to the terms of the new pact earlier this week, and the union's leadership signed off on it yesterday.
UAL hopes to foist its four pension plans on to Pension Benefit Guaranty Corp. the quasigovernmental pension insurer, which would save UAL from making more than $4 billion in contributions through 2008. The PBGC opposes UAL's plans because it says the pension debt of $8.3 billion is a legally binding obligation to UAL's 123,000 active and retired workers. However, if UAL can show the agency and the court that it couldn't survive with that financial burden, the pension agency could be obliged to take over the plans.
Among UAL employees, the pilots likely would be disproportionately harmed by the plan termination. They are the highest-paid airline employees and normally enjoy lucrative pension payments. But because, by law, they must retire at age 60, they would get much lower PBGC pension payouts. UAL's other employees, who earn less and can work until 65 or beyond, wouldn't see their pension benefits curtailed nearly as much.
"I've never seen this way of settling a pension termination," said Mr. Presser, speaking of the issuance of the notes convertible into new UAL stock. "It's a robust capital-market solution to an otherwise unsolvable pension problem."
Capt. Mark Bathurst, chairman of the ALPA branch at United, said the leadership council unanimously endorsed the agreement. He said the council recognized that United can't secure bankruptcy-exit financing without changing its cost structure. He said the convertible-note provision "will be the cornerstone in making the contract acceptable" to the members.
Defined-benefit pensions are a cherished component of compensation in many old-line companies' labor contracts. Unions tend to want to preserve those benefits as long as possible. Some unions have litigated when their plans were terminated, often in bankruptcy, and taken over by the PBGC. For ALPA, which sets the pattern for bargaining at other unions, to agree to let the plan go seems to indicate that the union understands UAL's financial predicament.
The five-year agreement now goes to the pilots for a ratification vote in early January. The group already agreed last year to $1.1 billion in annual cost savings by cutting pay and increasing productivity by 15%. This new deal provides UAL with about $180 million to $190 million more in annual savings, not including the cash savings that would accrue to UAL if it terminates the pension plan.
A seventh-year Boeing 737-300 captain would earn $118.63 an hour. That captain earned $181.93 an hour when the company filed for bankruptcy protection two years ago. Under a contract reached in early 2003, that hourly rate fell to $139.08.
UAL is asking its employees for a total of $725 million in additional wage and benefit savings, and hopes to save $639 million a year in cash from sidestepping the pension obligations and moving to cheaper defined-contribution retirement plans for its current workers. In the pilots' case, if the new contract is approved, the airline would put 6% of their annual pay into a new retirement plan. The group would continue to receive 9% of their compensation contributed to an existing 401(k)-type plan.
ALPA doesn't represent the rights of United's 6,000 retired pilots, and this tentative agreement doesn't pertain to them.
The retirees have created their own committee to fight the termination in bankruptcy court, or at least to try to soften the blow to their constituents.
UAL earlier this week imposed concessions on its salaried and management workers and is in talks with its other unions about revised contracts that would provide further savings and allow it to terminate three other defined-benefit plans. In case the unions don't agree by next month, UAL has started the legal process of asking the bankruptcy judge to allow it to annul the existing contracts so the airline can impose terms of the employees.
http://www.apapdp.org/cms/staticfile..._TA_121704.pdf
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United pilots silent on pension objection
Federal pension agency questions giveback accord
By Carla Mozee, CBS MarketWatch
Last Update: 4:11 PM ET Dec. 18, 2004__
SAN FRANCISCO (CBS.MW) -- The union representing United Airlines pilots refused Saturday to discuss reports that a federal pension agency might oppose a cost-cutting plan.
After the Air Line Pilots Union leadership approved cuts, the Pension Benefit Guaranty Corp. issued a statement saying that the agreement could set a dangerous precedent and that the agency may take action against it, according to news reports.
Dave Kelly, a spokesman for United pilots, told CBS MarketWatch he had seen the pension agency's letter but refused to comment on it. Another union spokesman did not return a message asking for comment.
The union negotiated a tentative contact agreement Thursday that would cut pay by about 15 percent through 2009 and accept termination of a pension plan. After leadership approved the plan Friday, it awaits ratification by 6,400 United pilots.
But the contract, which also needs approval from a federal bankruptcy judge, could face a legal challenge from the Pension Benefit Guaranty Corporation, according to news reports Saturday.
In exchange for the agreement, bankrupt United, owned by UAL Corp. (UALAQ: news, chart, profile), said it will make higher contributions to a retirement plan for its active pilots. The plan has a similar structure to a 401(k) plan and does not cover United's retired pilots, according to the New York Times.
Bradley Belt, executive director of the Pension Benefit Guaranty Corp., said United is "making generous new pension promises even as it is refusing to honor its old pension promises." The Washington Post said Saturday that United's unfunded liabilities for all it unions' pensions could add $6.4 billion to the PBGC's rising deficit. The agency was created to ensure that pensions do not leave retirees in the lurch when companies default.
United said it sees no problem with the latest accord. "We believe the tentative agreement is appropriate under all applicable law," Jean Medina, a spokeswoman for United Airlines, said Saturday. "We look forward to ratification from the pilots and presenting it to the bankruptcy court for approval."
Medina said the agreement could be reviewed by the bankruptcy court by early January.
The pension agency also said it was concerned that the pilots union insisted on the termination of the pension plans for other United employees.
The agreement states that the deal will be called off if United continues the existing defined-benefit pension program for any other employee group, in a cautionary move aimed at preventing United from saying that the pilots' concessions are enough, AP said.
Union leader Mark Bathurst said in a Thursday letter to union members that the decision to approve the agreement was not "reached lightly, and it came only after the group realized that a negotiated settlement -- not a litigated outcome -- best serves you and your career."
In addition to the higher contributions to the separate benefit plan, United said it will issue to the pilots $550 million worth of notes that can be converted to company shares six months after the airline exits from Chapter 11 bankruptcy status.
The financial adviser for United's pilots, Stephen Presser, told the New York Times that it had been difficult for the airline and the union to agree on an acceptable way to terminate the pension plan and that if it's allowed, the agreement could become a model for other financially strapped companies to follow.
The pilots' deal is the first of several that United is trying to negotiate with its unions as it tries to cut expenses by another $725 million a year. United last month raised its savings goal to $7 billion, up from $5 billion.
Richard Turk, spokesman for the Aircraft Mechanics Fraternal Association Local 9, said he understands the pilots' move to protect what's left of their retirement plan. "They don't want to be the only ones out there on an island," he said. "But if we don't agree to anything, that's bad for the pilots and for the company. But that doesn't put any pressure on us."
Turk also said the tentative agreement "makes us realize that this company is in the mood to compromise." The AMFA will continue its negotiations with United on Monday in Chicago.
The unions have already agreed to $2.5 billion in concession since the airline filed for bankruptcy in December 2002.
Carla Mozee is a CBS MarketWatch reporter in San Francisco.
Federal pension agency questions giveback accord
By Carla Mozee, CBS MarketWatch
Last Update: 4:11 PM ET Dec. 18, 2004__
SAN FRANCISCO (CBS.MW) -- The union representing United Airlines pilots refused Saturday to discuss reports that a federal pension agency might oppose a cost-cutting plan.
After the Air Line Pilots Union leadership approved cuts, the Pension Benefit Guaranty Corp. issued a statement saying that the agreement could set a dangerous precedent and that the agency may take action against it, according to news reports.
Dave Kelly, a spokesman for United pilots, told CBS MarketWatch he had seen the pension agency's letter but refused to comment on it. Another union spokesman did not return a message asking for comment.
The union negotiated a tentative contact agreement Thursday that would cut pay by about 15 percent through 2009 and accept termination of a pension plan. After leadership approved the plan Friday, it awaits ratification by 6,400 United pilots.
But the contract, which also needs approval from a federal bankruptcy judge, could face a legal challenge from the Pension Benefit Guaranty Corporation, according to news reports Saturday.
In exchange for the agreement, bankrupt United, owned by UAL Corp. (UALAQ: news, chart, profile), said it will make higher contributions to a retirement plan for its active pilots. The plan has a similar structure to a 401(k) plan and does not cover United's retired pilots, according to the New York Times.
Bradley Belt, executive director of the Pension Benefit Guaranty Corp., said United is "making generous new pension promises even as it is refusing to honor its old pension promises." The Washington Post said Saturday that United's unfunded liabilities for all it unions' pensions could add $6.4 billion to the PBGC's rising deficit. The agency was created to ensure that pensions do not leave retirees in the lurch when companies default.
United said it sees no problem with the latest accord. "We believe the tentative agreement is appropriate under all applicable law," Jean Medina, a spokeswoman for United Airlines, said Saturday. "We look forward to ratification from the pilots and presenting it to the bankruptcy court for approval."
Medina said the agreement could be reviewed by the bankruptcy court by early January.
The pension agency also said it was concerned that the pilots union insisted on the termination of the pension plans for other United employees.
The agreement states that the deal will be called off if United continues the existing defined-benefit pension program for any other employee group, in a cautionary move aimed at preventing United from saying that the pilots' concessions are enough, AP said.
Union leader Mark Bathurst said in a Thursday letter to union members that the decision to approve the agreement was not "reached lightly, and it came only after the group realized that a negotiated settlement -- not a litigated outcome -- best serves you and your career."
In addition to the higher contributions to the separate benefit plan, United said it will issue to the pilots $550 million worth of notes that can be converted to company shares six months after the airline exits from Chapter 11 bankruptcy status.
The financial adviser for United's pilots, Stephen Presser, told the New York Times that it had been difficult for the airline and the union to agree on an acceptable way to terminate the pension plan and that if it's allowed, the agreement could become a model for other financially strapped companies to follow.
The pilots' deal is the first of several that United is trying to negotiate with its unions as it tries to cut expenses by another $725 million a year. United last month raised its savings goal to $7 billion, up from $5 billion.
Richard Turk, spokesman for the Aircraft Mechanics Fraternal Association Local 9, said he understands the pilots' move to protect what's left of their retirement plan. "They don't want to be the only ones out there on an island," he said. "But if we don't agree to anything, that's bad for the pilots and for the company. But that doesn't put any pressure on us."
Turk also said the tentative agreement "makes us realize that this company is in the mood to compromise." The AMFA will continue its negotiations with United on Monday in Chicago.
The unions have already agreed to $2.5 billion in concession since the airline filed for bankruptcy in December 2002.
Carla Mozee is a CBS MarketWatch reporter in San Francisco.
Good luck to the careers at United, and the pensions.
No matter what the cause of reduced pay rates and benefits at any of the US major airlines, each reduction has a serious influence on what happens at the other larger US airlines, and what pilots at the "entry-level" carriers can look forward to. I can not imagine any active US pilots feeling any satisfaction or "Schadenfreude" (joy in others' harm) when reading about any of these changes in our industry. Even several who are independently wealthy (with this company) probably have some sympathy.
Some managements denied that pattern-bargain existed in the past, in the 'good old days', despite overwhelming evidence to the contrary, and the same descriptions for both similar salaries and work rules.
No matter what the cause of reduced pay rates and benefits at any of the US major airlines, each reduction has a serious influence on what happens at the other larger US airlines, and what pilots at the "entry-level" carriers can look forward to. I can not imagine any active US pilots feeling any satisfaction or "Schadenfreude" (joy in others' harm) when reading about any of these changes in our industry. Even several who are independently wealthy (with this company) probably have some sympathy.
Some managements denied that pattern-bargain existed in the past, in the 'good old days', despite overwhelming evidence to the contrary, and the same descriptions for both similar salaries and work rules.
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United Airlines pilots' deal sparks backlash from other unions
HONG KONG (AFX) - The pensions deal United Airlines signed with its pilots is
conditional on the termination of all pension plans at the airline, even as the
pilots are partly compensated for the loss of their retirement packages by 550
mln usd in convertible notes, the Financial Times reported on its website.
The FT, which obtained a copy of the pilots' deal, said the contract they
negotiated has sparked a backlash from other unions at United, a unit of UAL
Corp, the report said.
Pat Friend, president of the Association of Flight Attendants, said in an
interview with the FT: "I think (the Airline Pilots Association) should be
expelled from the AFL-CIO. They have no idea what being a trade unionist means."
The report said the deal signed by the pilots undercuts efforts by some of
United's unions to seek a trustee to replace management.
It suggested that the pilots' interests are lined up with management's, with the
agreement subject to terminated if United loses its "exclusive right to file a
plan of reorganization," and in the event of the "appointment of a trustee in
the bankruptcy case."
"If they fail to get 500 mln usd from other unions, they can terminate this,"
Friend said. "And if management is replaced, they can terminate this. It looks
like a mutual protection deal to stop the pesky flight attendants and mechanics
from filing for a trustee, while selling out their pensions.They are really
despicable."
United's flight attendants are voting on a proposal to authorize a strike, with
vote counting due on Dec 30, the report said.
Further challenges to United's pilot deal could come from creditors and from the
Pension Benefit Guaranty Corporation, the agency that would have to pick up
about 6.4 bln usd in liabilities if United's pensions were terminated, the
report said.
On Friday PBGC executive director Bradley Belt said the deal with the pilots
"sets a dangerous precedent. The company is making generous new pension promises
even as it is refusing to honor its old promises. United and the pilots' union
have no authority to force other workers and the PBGC to accept termination of
those plans."
HONG KONG (AFX) - The pensions deal United Airlines signed with its pilots is
conditional on the termination of all pension plans at the airline, even as the
pilots are partly compensated for the loss of their retirement packages by 550
mln usd in convertible notes, the Financial Times reported on its website.
The FT, which obtained a copy of the pilots' deal, said the contract they
negotiated has sparked a backlash from other unions at United, a unit of UAL
Corp, the report said.
Pat Friend, president of the Association of Flight Attendants, said in an
interview with the FT: "I think (the Airline Pilots Association) should be
expelled from the AFL-CIO. They have no idea what being a trade unionist means."
The report said the deal signed by the pilots undercuts efforts by some of
United's unions to seek a trustee to replace management.
It suggested that the pilots' interests are lined up with management's, with the
agreement subject to terminated if United loses its "exclusive right to file a
plan of reorganization," and in the event of the "appointment of a trustee in
the bankruptcy case."
"If they fail to get 500 mln usd from other unions, they can terminate this,"
Friend said. "And if management is replaced, they can terminate this. It looks
like a mutual protection deal to stop the pesky flight attendants and mechanics
from filing for a trustee, while selling out their pensions.They are really
despicable."
United's flight attendants are voting on a proposal to authorize a strike, with
vote counting due on Dec 30, the report said.
Further challenges to United's pilot deal could come from creditors and from the
Pension Benefit Guaranty Corporation, the agency that would have to pick up
about 6.4 bln usd in liabilities if United's pensions were terminated, the
report said.
On Friday PBGC executive director Bradley Belt said the deal with the pilots
"sets a dangerous precedent. The company is making generous new pension promises
even as it is refusing to honor its old promises. United and the pilots' union
have no authority to force other workers and the PBGC to accept termination of
those plans."
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Needless to say, the Flight Attendant group is not very happy right now.
The other part to this is that the retirees are the ones that are getting hammered on this also.
The other part to this is that the retirees are the ones that are getting hammered on this also.
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The competition is hoping United stays alive on life support for a while longer to keep downward pressure on pilot wages and pensions. The UAL pilots are famously concerned for their own welfare and will keep making deals with the devil at the expense of the retirees and other pilot groups. Like everyone else, they have boat payments to make. Sadly, it probably won't make a difference in UAL's survival unless things really improve. Ironically, now that the company is going under, UAL employees are delivering improved customer service and ontime perfomance. Four years ago, when the airline was making money hand over fist, the pilots delayed flights and the FA's were rude and indifferent (on Pac Rim flights, anyway).
Delta has quietly put plans in place for a 2005 bankruptcy filing in case fuel prices don't drop significantly. They will get round two (and maybe three) of the pilot concessions in bankruptcy court a la UAL and US Air.
Look for a couple of major airline liquidations in the months to come...
Delta has quietly put plans in place for a 2005 bankruptcy filing in case fuel prices don't drop significantly. They will get round two (and maybe three) of the pilot concessions in bankruptcy court a la UAL and US Air.
Look for a couple of major airline liquidations in the months to come...
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United
I have read the responses to the UAL pilots Tentative Agreement. As this is my first post I shall keep it short. Since when is the flight attendant union ever happy. I recall that they did not sign on board when the pilots took a 23.7% pay hit in the ESOP to keep things going at UAL. Nobody at other airlines complained in 2000 when the pilots had the industry leading contract. All the pilots whether active or retired are going to take a hit bigtime. The F/A's are not because they never had the big pension issue to begin with.. However I have never seen anyone on point in the 20yrs I have been with the firm other than the pilot group. I am wondering to paraphrase a movie line "Is the view better from the cheap seats." Jim I flew you.. The others When have UAL pilots sold out other groups. This TA has not been ratified. Respectfully Birdman
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I have to agree that the prognosis is not particularly encouraging but; a couple of liquidations? No, I think only one....which will be sufficient to let the terminally ill subject of this thread live on life support for some considerable time. Remember that it's not necessary to outrun the wolf pack, only one of your weaker peers.
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At the risk of sounding antagonistic, why is United allowed to still be in C11 from a market p.o.v.? Everyone would surely benefit from mergers imposed by the market conditions rather than what is effectively working as a subsidy and an unrealistic prolonging of a hub and spoke system, which SW operates effectively without (to some extent)?
At least negotiated rather than imposed settlements ensure sanity of the negoitiators involved - it would be carnage to allow it to get that far down the road as to impose a settlement on so many employees.
Would lack of C11 have forced many management to react earlier in this case do you think, and perhaps protect employee groups from imposed/unfair settlements?
At least negotiated rather than imposed settlements ensure sanity of the negoitiators involved - it would be carnage to allow it to get that far down the road as to impose a settlement on so many employees.
Would lack of C11 have forced many management to react earlier in this case do you think, and perhaps protect employee groups from imposed/unfair settlements?
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United is still in Chapter 11 because there are a lot of jobs at stake (political pressure) and aircraft leases at stake (financial pressure). Boeing, EADS, and GECAS don't want a flood of aircraft on the market should UAL liquidate.
Southwest, like most LCCs, is a blood sucking leech on the industry. They cherry pick the most lucrative markets and drive the price down to unrealistic levels. Then, once the market is theirs, they raise the price back to a sustainable yield. A hub carrier has built in inefficiencies such as turn times and utilization that the point to poiunt carriers do not have. But the LCCs do not serve the many destinations that the hub carriers do, many of them smaller markets that SWA would never bother with. The airline business provides a public service, a service of wide ranging transportation to a political and geographic area. LCCs do not provide service outside their limited city pairs and do not provide as big a public benefit as do a hub carrier.
When 43% of a ticket dollar goes to taxes and fuel goes up to $45 dollars a barrel and the government just shrugs its shoulders then you have a tough situation to be in. UAL lost half of the airliners in 9/11. The pilots were the first to die. Yet pilots are portrayed as the problem when the real problem is the fact that no one will charge a fare that will make them any money. Management are just wetting themselves with this chance to take those uppity pilots down a notch. They will come running, though the next time they need the pilots to step up and work out a solution to the next crisis.
Southwest, like most LCCs, is a blood sucking leech on the industry. They cherry pick the most lucrative markets and drive the price down to unrealistic levels. Then, once the market is theirs, they raise the price back to a sustainable yield. A hub carrier has built in inefficiencies such as turn times and utilization that the point to poiunt carriers do not have. But the LCCs do not serve the many destinations that the hub carriers do, many of them smaller markets that SWA would never bother with. The airline business provides a public service, a service of wide ranging transportation to a political and geographic area. LCCs do not provide service outside their limited city pairs and do not provide as big a public benefit as do a hub carrier.
When 43% of a ticket dollar goes to taxes and fuel goes up to $45 dollars a barrel and the government just shrugs its shoulders then you have a tough situation to be in. UAL lost half of the airliners in 9/11. The pilots were the first to die. Yet pilots are portrayed as the problem when the real problem is the fact that no one will charge a fare that will make them any money. Management are just wetting themselves with this chance to take those uppity pilots down a notch. They will come running, though the next time they need the pilots to step up and work out a solution to the next crisis.
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Cactus hit the nail on the head. This is essentially union busting hiding behind a judge. Unless fuel comes down to sustainable levels then everyone could work for free and they still wouldn't make any money. The airline industry is in a desperate state weather in C11 or not. We have to have tax relief and even fuel subsidies, if necessary, in order to survive. Gutting labor contracts is not a long term solution. It's time for ALPA to draw a line in the sand.
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Cactus, I would have thought that those of you from the 'Land of the Free' would be aghast at the thought of a restricted economy a la (former) USSR. In a free market, airlines like Southwest and other LCC's are just the economic leveler. Blaming them is just barking up the wrong tree. Try persuading the travelling public instead. It's their dollars that dictate the market. If you're not careful, it could be Roubles dictating instead.
It's not a nice thought but it is the way of our capitalist society with the free market economics that give you and the rest of us the choice of flying LCC or Full Frills schedule. Your anger at the effect the LCC's are having on the majors is misdirected.
It's not a nice thought but it is the way of our capitalist society with the free market economics that give you and the rest of us the choice of flying LCC or Full Frills schedule. Your anger at the effect the LCC's are having on the majors is misdirected.
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>>Southwest, like most LCCs, is a blood sucking leech on the industry.
Yeah, and what does that make bankrupt United? An industry poster child? Have you seen the latest TA?
Yeah, and what does that make bankrupt United? An industry poster child? Have you seen the latest TA?
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Hmm, Southwest is the problem. I just flew a large US carrier, not United, not Delta, not Northwest, and not USairways. And it wasn't a low cost carrier.
I had an upgrade to first class. O.K. long day, I settle in in first class 20 minutes before T/O- nothing, not a soda, not a gin and tonic, not a hello. In the 1 and 1/2 hour flight, I was served one drink halfway through and had to ring my call button for a second.
I had a long layover between the next leg (also first class). I checked the board and saw an earlier flight. My choice was go earlier in coach or take the flight with the upgrade. Well, the service was so pi55-poor on the previous flight it was a no brainer.
When I book on Southwest, I know what I'm getting- decent service, quickly, and with a smile. All coach- who cares? At least I'm getting service.
I hope airline employees realize, that just like in my business, customers don't pay my salary. I provide my customers equipment and service for which we have negotiated a price and they are paying for. They have a contract with me- I have a ticket with the airlines. And believe me, my business it brutally competative. If fuel prices go up, or steel prices go up (which they have- should I be able to go to the government for more money?
I've said it before here- the value of your business is set in the transaction (what the customer is willing to pay)- not what you think your product is worth.
I had an upgrade to first class. O.K. long day, I settle in in first class 20 minutes before T/O- nothing, not a soda, not a gin and tonic, not a hello. In the 1 and 1/2 hour flight, I was served one drink halfway through and had to ring my call button for a second.
I had a long layover between the next leg (also first class). I checked the board and saw an earlier flight. My choice was go earlier in coach or take the flight with the upgrade. Well, the service was so pi55-poor on the previous flight it was a no brainer.
When I book on Southwest, I know what I'm getting- decent service, quickly, and with a smile. All coach- who cares? At least I'm getting service.
I hope airline employees realize, that just like in my business, customers don't pay my salary. I provide my customers equipment and service for which we have negotiated a price and they are paying for. They have a contract with me- I have a ticket with the airlines. And believe me, my business it brutally competative. If fuel prices go up, or steel prices go up (which they have- should I be able to go to the government for more money?
I've said it before here- the value of your business is set in the transaction (what the customer is willing to pay)- not what you think your product is worth.
Grandpa Aerotart
I've said it before here- the value of your business is set in the transaction (what the customer is willing to pay)- not what you think your product is worth.
And that is a problem for pilots (not just...it's endemic in all employment) they have a work contract that is exactly meaningless...not worth the paper it's written on...might as well not have it, when it can be so successfully negated by management who will retire millionaires no matter what short sighted decisions they make.
The average pax wants a cheap ticket...even if it's only perceived to be cheap that's ok....nothing else enters their head...certainly not aeroplane crashes caused by cut to the bone operations crewed by tired pilots, maintained by short staffed maintenance, turned around by short staffed agents, catered by short staffed catering companies...probably all outsourced because the airline wants to concentrate on their 'core business'...'what it is they do well' and other similar management speak.
Truth is these days that airlines, in general, do very little 'well'.
Perhaps 30%, and I'm being REALLY generous here- I personally put the number closer to 10%, of CEOs are truly worth their money. The rest just talk the talk but their only answer to 'increased shareholder value' is slashing costs with little vision of where that ultimately leads...doesn't matter anyway they'll either be long gone or if not get a fat payout to leave and keep quiet.
And what is the true value of shareholders?
What else drives the short sighted management practices that have become so much a part of corporate life in the last 20-30 yrs? Shareholders.
Not your average Ma and Pa shareholders...they buy shares of 'good' companies and hold on to them hoping to fund some sort of retirement...no institutional shareholders...the ones that move vast amount of money away from your business, and therefore the CEOs/Directors etc pockets, when you suddenly don't have double digit growth anymore...or the dividends dry up when the company wants to reinvest.
What happens when the beancounters have outsourced, rightsized, downsized, pared to the bone, made the company 'lean and mean' and there's nothing left besides the paypackets of the employees? Well they rightsize that too.
And when said airline is on the bones of it's arse along comes a beancounter sub species called Receiver ...assets only of course...oh and looky here...the retirement pension funds just become an asset...bit tough for the (ex)employee who may have dedicated 30 yrs to the company...an average of 6 times longer than any manager/CEO the place ever had...tough luck...that's market forces...still they got 10 cents on the dollar...should be thankfull really....ungreatfull old people...shoulda died by now.
