umguy
Jan 22, 03, 10:06 pm
Wednesday January 22, 8:28 pm ET
By John Crawley
WASHINGTON, Jan 22 (Reuters) - The U.S. Senate killed a proposal late on Wednesday to allow US Airways Group Inc (OTC BB:UAWGQ.OB - News) to restructure payments to its employee pension system, increasing chances the bankrupt carrier will terminate its pilots' retirement plan.
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The chamber voted to table a bipartisan amendment to a spending bill offered by Arlen Specter, a Pennsylvania Republican, and backed by the pilots' union and the carrier.
The proposal would have allowed US Airways to string out $3.1 billion in underfunded pension payments over 30 years. The current schedule is seven years.
David Siegel, the company's president and chief executive, said last week the carrier could meet pension obligations for all of its unions except the plan covering its 4,000 pilots, which is 50 percent underfunded.
And he said the airline would likely terminate that fund absent congressional intervention or a policy reversal by the quasi-government agency that oversees corporate retirement plans.
The Pension Benefit Guarantee Corp. has already rejected the 30-year payment idea.
The pilots' union said its US Airways members could lose up to 75 percent of their current investment if their plan is terminated. The pension benefit corporation would guarantee roughly 25 percent.
"We are deeply disappointed by the outcome of this evening's vote and the failure of the Senate to see the wisdom and public benefits of a restoration funding proposal to allow us to maintain our pension plans and meet our funding obligations, rather than turn the liability over to the federal government," Siegel said.
Siegel has said he would continue to work for a solution short of terminating the plan. And he has promised the pilots that he would take steps to create a new retirement plan as part of a restructured airline if the current program is ended.
US Airways is facing a fast-approaching deadline to resolve its pension problems one way or another.
The company must present its creditors with a reorganization plan by the end of the month that clears up questions about the underfunded liability. Resolving this issue is also necessary to receive a $900 million federal loan guarantee.
Several Senate lawmakers said they opposed Specter's proposal because it would not have helped the industry, including bankrupt United Airlines (NYSE:UAL - News) or other carriers with underfunded pensions.
"The airlines are in bad shape," said Sen. John McCain, chairman of the Commerce Committee and an Arizona Republican. "This needs to be viewed in the context of the entire industry."
McCain said he would be willing to take up the matter at a later date. But proponents argued US Airways merited an exception immediately because it is fighting for its survival in bankruptcy court.
Officials from the Air Line Pilots Association could not be reached for comment.
By John Crawley
WASHINGTON, Jan 22 (Reuters) - The U.S. Senate killed a proposal late on Wednesday to allow US Airways Group Inc (OTC BB:UAWGQ.OB - News) to restructure payments to its employee pension system, increasing chances the bankrupt carrier will terminate its pilots' retirement plan.
ADVERTISEMENT
The chamber voted to table a bipartisan amendment to a spending bill offered by Arlen Specter, a Pennsylvania Republican, and backed by the pilots' union and the carrier.
The proposal would have allowed US Airways to string out $3.1 billion in underfunded pension payments over 30 years. The current schedule is seven years.
David Siegel, the company's president and chief executive, said last week the carrier could meet pension obligations for all of its unions except the plan covering its 4,000 pilots, which is 50 percent underfunded.
And he said the airline would likely terminate that fund absent congressional intervention or a policy reversal by the quasi-government agency that oversees corporate retirement plans.
The Pension Benefit Guarantee Corp. has already rejected the 30-year payment idea.
The pilots' union said its US Airways members could lose up to 75 percent of their current investment if their plan is terminated. The pension benefit corporation would guarantee roughly 25 percent.
"We are deeply disappointed by the outcome of this evening's vote and the failure of the Senate to see the wisdom and public benefits of a restoration funding proposal to allow us to maintain our pension plans and meet our funding obligations, rather than turn the liability over to the federal government," Siegel said.
Siegel has said he would continue to work for a solution short of terminating the plan. And he has promised the pilots that he would take steps to create a new retirement plan as part of a restructured airline if the current program is ended.
US Airways is facing a fast-approaching deadline to resolve its pension problems one way or another.
The company must present its creditors with a reorganization plan by the end of the month that clears up questions about the underfunded liability. Resolving this issue is also necessary to receive a $900 million federal loan guarantee.
Several Senate lawmakers said they opposed Specter's proposal because it would not have helped the industry, including bankrupt United Airlines (NYSE:UAL - News) or other carriers with underfunded pensions.
"The airlines are in bad shape," said Sen. John McCain, chairman of the Commerce Committee and an Arizona Republican. "This needs to be viewed in the context of the entire industry."
McCain said he would be willing to take up the matter at a later date. But proponents argued US Airways merited an exception immediately because it is fighting for its survival in bankruptcy court.
Officials from the Air Line Pilots Association could not be reached for comment.