Pension fall short for front-line workers, but not CEOs: Pensions have become a major source of concern for rank-and-file airline workers, but that's not necessarily so for airline CEOs. At United Airlines, workers face losing up to $3 billion in promised pension benefits as the carrier shifts its pension obligations to the feds. But over at Continental, when CEO Gordon Bethune retired last year he took a $22 million lump-sum payment from his retirement plan, according to MSN Money. Continental's pension plan is currently underfunded by $1.58 billion, though that carrier has been making progress in shoring up workers pensions. Still, "That situation with Bethune just crystallizes the whole unfairness of it all," says Paul Hodgson of The Corporate Library, a Maine company that reviews executive pay and corporate governance issues for investors. "The amount that (executives) have earned over the years would seem to be enough to provide for their retirement, and the idea that you have to provide retirement benefits worth 50% of their annual compensation is absurd." At the other end of the spectrum, American CEO Gerard Arpey got a standing ovation from employees in Washington on Wednesday as he appeared before Congress, according to the Chicago Sun-Times. Arpey was pushing Congress for legislation he says will help his airline protect its workers' pension plans. Updated 9 a.m. ET

Isn't it underfunded because they deffered a 1.5 billion dollar payment just last year? Not that big of a deal if you ask me, they can compensate for it later when they can afford to contribute that amount...

I like how the snippette fails to mention the current total value of the Continental pension, which I'm sure at the moment and forseeable furture is enough to provide accordingly...

-Vincent

These statements are all true, with a couple of caveats:

(1) These types of pension arrangements are generally bound by employment contracts, and if you look at the terms, they tend to be less generous in this very challenged sector than others. You can make your arguments about the fairness of rich penion benefits for senior corporate execs in general, but the fact is that this industry needs to be competitive with others with which it competes for executive talent - and in fact right now, it tends to be on the low end.

(2) Unlike the other qualified pension plans, such executive plans are generally unfunded. So the general employees might face a reduction in benefits if CO filed for bankruptcy and left behind their current underfunded plan. But since the exec plan is not funded, they would have nothing to fall back on in the event of bankruptcy, and would have to stand in line with all of the other creditors of the company.

First of all, it's pathetically stupid for a company who's very existence depends on a commodity (oil prices) to have a defined benefit plan anyway. All pension plans today should be defined contribtion plans integrated with a 401K aspect to them.

Maybe so, but those organizations that have their pension plans setup in this way are still obligated to provide appropriately, regardless of how they're setup. Pensions are a big thing to me, even though I do not, have not, and probably never will work for a company that has one! For as long as pensions have been around, people have relied on them to provide for them during retirement. Whether or not that is a wise move is not the point here, it was advertised to tens of millions of workers as a true benefit of working for a particular company. When I read about Bethleham Steel in the past, or United currently defaulting on their plans, it makes me furious. United should ahve shut down routes, sold planes...anything to save their workers hard-earned $$'s.

Getting back to CO, based on their recent financial performance - compared to the other LCC's - I would think that CO is using their money wiser than the others.

There's a certain naivete and short-sightedness that many of the 'don't touch my pension money' crowd seems to exhibit. Many seem to have failed to grasp that many pension funds are currently grossly underfunded, meaning that the company doesn't have the money to pay the benefits when they come due. The cash has to come from somewhere and when a company is unprofitable, there is no cash to go around.

Speaking of the United pension action, people don't seem to understand. United couldn't fund the pension. If United shuttered their doors, the beneficiaries would have only received an amount equal to what United had contributed, an amount far less then they were due. By shifting their pension obligations, beneficiaries were guaranteed an amount far greater than they would receive if United completely goes under. Which would you rather have? Gamble the bulk of your defined pension on United's survival for the full amount, or give up a small portion of it in exchange for a guarantee. Don't they always say to take even money?

Secondly, suggesting the UA should shut down routes and sell planes to save the pensions is asinine. UA's business is flying planes. You might as well just say close up shop and divvy up what's left. Even if you could somehow shut down routes and sell planes to profitability, what does that mean? Fewer routes and planes means more jobs lost. Would you rather keep your job or your pension?