"United Airlines' pension decision worries US agency"

Monday, July 26, 2004

Pension agency voices 'great concern' to United Airlines
BY DAVE CARPENTER
The Associated Press


CHICAGO - The government's pension insurance program expressed "great
concern" to United Airlines on Monday about the bankrupt carrier's move
to halt contributions to employee pension funds and demanded assurances
it is not abandoning all future obligations.

The head of the Pension Benefit Guaranty Corp. cautioned United that
terminating any of its pension plans altogether would have harmful,
broad consequences.

"The decision to stop contributing to the pension plans is a serious
matter that increases the risk of loss to plan participants and the
federal pension insurance program," the agency's executive director,
Bradley Belt, said in a letter to United CEO Glenn Tilton.

The letter was a response to United's announcement last Friday,
confirming the contributions cut-off after already skipping a required
$72 million quarterly payment earlier this month.

The airline's unions already had condemned the move, a possible first
step toward ending the plans if United deems such a drastic action
necessary to make itself more attractive to potential financiers.

Terminating the plans would put United's multibillion-dollar pension
burden on the government agency, which takes over failed plans and pays
benefits to retirees that sometimes are substantially reduced. It would
be the largest such default ever by an airline.

Pension Benefit Guaranty, which insures benefits for 44 million
Americans, already has been designated a "high risk" program because it
has been forced to take over a record number of failing pension plans.
The PBGC racked up a record $11.2 billion deficit from covering failing
plans through the end of 2003.

"UAL's announcement last Friday that it would no longer make legally
required contributions to its employee pension plans while in bankruptcy
is of great concern," Belt wrote Tilton. Noting that United owes over
$500 million to its under-funded plans this year and more than $4
billion over the next five years, he asked for a detailed explanation of
how the company's business plan will enable it to meet those
obligations.

United spokeswoman Jean Medina said the company intends to meet with the
PBGC to discuss the issues directly. The pension board said in a letter
that a meeting was scheduled for Thursday, but Medina said it would be
held on another day yet to be determined.

"We believe we're doing what we need to do to maintain liquidity and
flexibility as we arrange financing to exit bankruptcy," she said.

United, which last turned a profit in 2000, lost $459 million in the
first quarter of this year and is expected to report another hefty loss
for the second quarter on Thursday.

The airline has been restructuring in Chapter 11 bankruptcy since
December 2002. But its efforts to emerge have been complicated by its
failure to receive a government loan guarantee and by fast-rising jet
fuel prices which are now expected to cost it $900 million more for 2004
than it projected at the end of last year.

ON THE NET

Pension Benefit Guaranty Corp. at www.pbgc.gov

United Airlines at www.united.com


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