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Something I've never understood

I'm looking at this story on the liquidation of United Airlines' pension plan. I can sort of understand the employees screaming about this, because nobody likes to see their pension getting cut by over 50%, but what I don't get is why these people trusted United to fully fund these liabilities in the first place. It seems to me that handling pensions is something the unions should have been handling in-house on a pay-as--you-go basis, with the airline either kicking in some cash as a sweetener or leaving it strictly up to the employees and their unions. On top of that, United has had financial problems as long as I can remember. What kind of idiots did the union have negotiating contracts if they couldn't get the airline to change the retirement benefits to a 401K or other defined-contribution system?

For that matter, if the unions aren't taking care of pensions and health care because they've stuck the employers with the bill, what the hell are they collecting dues for?

UPDATE Jane Galt and Will Collier also comment on this, and do comparisons with another underfunded pension fund.


( 4 comments — Leave a comment )
May. 12th, 2005 02:37 am (UTC)
Wombat asks good questions about the whole pension fund thing,
bankruptcy, the PBGC etc.

It is all a big shell game - first question, why can a company get away
with making tons of promises in terms of pensions to its work force,
and have them backed (even if at less than 100%) by the US Gov, which
really just means US (you and me, droogies) - and then to cronically
underfund it - so when they were breakeven a while back, they really
weren't because that quarter they should have been putting 300 million
bucks into the pension fund as a quarterly payment, but they weren't, right?

Worldcom got put into bankruptcy because they were moving 300 mil a
quarter from one column to another incorrectly to make the company look
profitable - how is this different?

So, the company should not be allowed to underfund, and if it does so then
it needs to get taken care of RIGHT THEN AND THERE and not N years later
when they are underfunded by 10 Billion dollars.

Now, it becomes pretty obvious that there was, at some point along the timeline,
a realization of what was going on by management - they had to see if somewhere
along the line, at 3 billion underfunded, or at 5 or 7 or 9 or 10.... any operations
past that point are fraudulent - someone should be going to JAIL for this stuff.
It is fraud pure and simple.


May. 12th, 2005 03:51 am (UTC)
Agreed. I still want to know why the unions weren't running a pension plan, though.
May. 14th, 2005 11:29 pm (UTC)
yep - unions, regulators, hell, anybody.... billions being looted and
nobody even knowing who is in charge? or no place to call for any
enforcement? Hey, I am as capitalist as they come, but this is fraud,
straight up.

Now that Untied (deliberate dig there) has shed its pension obligation,
boy they must be feeling studly - and now any airline who keeps their
pension and tries to keep it funded (i.e. doing the right thing) will be at
a serious disadvantage to Untied. So expect them to be shedding these
pension funds too - the level playing field is gone now, so time to cut
and run.

again, feh.

May. 15th, 2005 05:12 am (UTC)
I think UAL has really shot itself in the foot WRT relations with their unions, and this is going to affect thing going forward, since the unions won't trust anything management has to say from here on in.

What I think the other airlines should be doing is renegotiating the retirement benefits so they're more portable and 401k-like instead of the defined-benefit plans they seem to have in place now. It might give them an edge financially and on the labor relations side as well. WFC is non-union, but they have a very minimal pension plan supplemented by a 401k, which gets sweetened by the occasional option grant or (lately) outright stock grants to the 401k.
( 4 comments — Leave a comment )