Official: US Airways Risks Pensions

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Official: US Airways Risks Pensions

By THE ASSOCIATED PRESS, NY Times

January 14, 2003

WASHINGTON (AP) -- A plan to help bail US Airways out of bankruptcy by extending its employee pension payments would risk retirement security for 44 million Americans, federal officials told a Senate hearing Tuesday.

But Pennsylvania's two senators, pushing to revise federal tax laws to give the financially embattled airline a 30-year cushion to pay $3.1 billion in pension obligations, responded that the federal benefits fund would pick up the bill anyway if US Airways goes belly-up.

At issue was legislation by Republicans Sens. Arlen Specter and Rick Santorum, who are trying to help bring the Arlington, Va.-based airline out of bankruptcy by the end of March. The lawmakers want the federal Pension Benefit Guaranty Corp. to let US Airways pay its pension liabilities -- mostly to the airline's pilots -- over three decades instead of the seven-year deadline it is now facing.

In testimony in front of a Senate Appropriations subcommittee hearing, PBGC executive director Steven A. Kandarian maintained that stringing out the payments would risk the stability of the 35,000 pension plans nationwide that the federal fund protects. Moreover, he said, the plan would give US Airways an unfair advantage at a time when other companies are grappling with high pension costs.

Kandarian also maintained that the PBGC does not have the jurisdiction to revise the law.

US Airways, the nation's sixth-largest airline, was the first to file for bankruptcy during the travel industry slump following the Sept. 11 terrorist attacks. The company is carrying a $61 billion debt, lost $2.1 billion in 2001 and has said it needs to cut costs by $1.6 billion to remain viable.

An estimated 17,000 of US Airways' 32,000 employees work in Pennsylvania. Its hubs are in Philadelphia, Pittsburgh and Charlotte, N.C.

The airline is set to appear in bankruptcy court on Thursday to seek approval for the reorganizational plan it outlined last month to emerge from bankruptcy. That proposal largely hinges on a $1 billion loan guarantee from the Air Transportation Stabilization Board that has been tentatively awarded on condition that US Airways settles its massive pension obligations.

PBGC will take over US Airways' pension plans if the airline is forced to liquidate. If that happens, pilots face losing up to 75 percent of the anticipated retirement benefits, said Capt. Duane E. Woerth, president of the Air Line Pilots Association.

``The time that we have to resolve this is very short,'' said US Airways President and CEO David Siegal. The airline's equity sponsor and other lenders ``expect a resolution to this matter within days, not weeks or months.''

The Senate last week refused to consider the pension extension bill, but Specter said he and Santorum may try to force a vote by a parliamentary procedure.