U.S. Takes United’s Pensions

The U.S. government Thursday took over United Airlines’ pension plans covering flight attendants and other workers, prompting the union representing the flight attendants to threaten a job action -- one that could happen as soon as today.

The action by the Pension Benefit Guaranty Corp. moves the bankrupt No. 2 U.S. airline closer to securing the labor savings it needs to exit Chapter 11 protection.

But the Assn. of Flight Attendants said the decision to shift the pension plan to the pension agency altered the union contract without workers’ consent and thus gave the union the right to strike immediately.

United, a unit of UAL Corp. based in Elk Grove Village, Ill., said Thursday that any work stoppage would be illegal.

The union -- which represents 20,000 active workers at United, about 4,000 of whom are based in California -- has said that to protect its pensions it would conduct intermittent job actions designed to cause havoc on certain routes.

The airline is the biggest carrier at San Francisco International Airport and one of the largest at Los Angeles International Airport.

“We don’t ever announce when or where. We might strike Paris. We might strike Texas,” union spokeswoman Sara Nelson Dela Cruz said.

“The idea here is not to strike United Airlines,” she added. “The idea is to save our retirement security.”

United said it was prepared to go to court immediately if the flight attendants stopped work.

“We believe any actions to disrupt operations would be illegal, and would only punish our customers and employees,” United spokeswoman Jean Medina said.

“We don’t believe any actions would be legal,” she added. “And we are prepared both operationally and legally to meet the needs of our customers.”

According to Medina, ticket sales haven’t been hurt by the union’s threats to strike.

The flight attendants union is the only one whose leadership has yet to negotiate a replacement retirement plan for its members. United said it still hoped to reach a negotiated deal.

The airline filed for bankruptcy protection in December 2002 and has been battered by soaring fuel costs and competition from low-cost carriers. In May it won court approval to shift its four pensions to the pension agency. The plans are underfunded by nearly $10 billion.

The government will guarantee $6.6 billion in benefits. By ending the pensions, United said it expected to save about $645 million a year.

Also Thursday, a House panel approved a measure overhauling the laws governing defined-benefit pension plans.

“The bill passed without opposition,” said John A. Boehner (R-Ohio), who heads the House Committee on Education and the Workforce. The measure will now move to the Ways and Means Committee, where Chairman Bill Thomas (R-Bakersfield) has said he will probably add it to a retirement-security legislative package.

The measure would give companies that provide defined-benefit plans five years to fully fund them. It also increases the premiums companies pay the pension agency to insure their plans.

Recent bankruptcies, including United’s, have raised concerns about the solvency of the agency. This year the agency, already with a $23.3-billion deficit, has taken on almost $10 billion more in unfunded liabilities.

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Bloomberg News and Reuters were used in compiling this report.