Airline pension default could cost billions
washingtontimes.com
WASHINGTON, DC, Aug. 1 (UPI) -- With the possibility of a $5 billion pension default by United Airlines, there's reportedly a possibility of more U.S. airline defaults totaling $110 billion.
Operating in bankruptcy, United is trying to attract investors it needs to survive and last month the airline said that it would no longer contribute to its pension plans.
United seems intent on shedding some or all of its $13 billion in pension obligations as the only way to emerge from bankruptcy proceedings, the New York Times reported Sunday.
Under pension law, the $13 billion owed to retirees cannot be legally taken away, however, under bankruptcy law workers are unsecured creditors. The $6 billion shortfall United has underfunded the pension fund is considered unsecured debt -- and workers could loose that money.
If the bankruptcy court allows United to terminate its pensions, other hard-hit airline carriers may follow.
The government's Pension Benefit Guaranty Corp., which insures pensions, is already hobbled by debt. If every airline with a traditional pension plan were to default, the government would have to pay an estimated $31 billion, but some employees would see their benefits reduced. |
