"Pensions cut off at United"

Saturday, July 25, 2004

Pensions cut off at United  
The Associated Press


CHICAGO - United Airlines said Friday that it planned no further
payments to its employee pension funds, a move the carrier said would
improve its chances of attracting financing needed to exit bankruptcy
protection.

The disclosure came nine days after United deferred a required quarterly
payment of $72 million to the pension funds, which are under review as
it scours its operations for further cost cuts in a Chapter 11
restructuring now set to last into mid-2005.

The union representing United ramp workers and public contact employees
condemned the move and said it is considering legal action to fight it.

"United Airlines is following a very dangerous path and cannot
successfully exit bankruptcy without living up to the commitments they
made to their employees," said Robert Roach Jr., general vice president
of transportation for the International Association of Machinists and
Aerospace Workers.

The machinists say that if United terminates the pension funds, which
cover 125,000 active and retired employees, it would be the largest
pension default ever in the airline industry.

"United Airlines has betrayed their employees and destroyed what little
credibility they had with us," said Randy Canale, president of IAM
District 141. He added that his group is "primed for a brutal fight."

United, the second-largest U.S. carrier, said its new $1 billion interim
financing package lined up this week effectively prohibits further
pension contributions before it leaves bankruptcy. That financing,
formally outlined at the company's monthly bankruptcy court hearing,
does not come due until next June 30.

United had been facing more than $4 billion in required payments to the
underfunded pension plans through 2008, including $725 million for 2004
alone.

Its need for cash intensified last month when the government rejected
its bid for a government loan guarantee that it said was needed in order
to emerge from bankruptcy. The company now needs to get that backing
from private lenders or investors, who are certain to demand that it cut
more costs.

United said it is studying the situation involving its pension funds and
beginning to hold talks with union leaders.


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