[Now this is official]-- "U.S. to Take Over UAL Pilots' Pensions"
Thu Dec 30, 2004 11:49 AM ET
WASHINGTON (Reuters) - The U.S. pension agency on Thursday said it would take over the retirement plans of pilots at bankrupt United Airlines, which are underfunded by $2.9 billion.
The Pension Benefit Guaranty Corp., which insures traditional retirement plans, said it would likely be liable for about $1.4 billion in guaranteed benefits, the third-largest claim in the history of the agency's program.
"Retirees will continue to receive monthly benefit checks without interruption, and other pilots will receive benefits when they retire," PBGC Executive Director Bradley Belt said.
The plans cover more than 14,000 active and retired United pilots and comes after a deal between the airline and pilots over concessions. The pension plans of the airline's other employees were not affected, the PBGC said.
United Airlines, the No. 2 U.S. airline and a unit of UAL Corp. (UALAQ.OB: Quote, Profile, Research) , has been trying to cut labor costs by $725 million a year beyond concessions already made by employees.
United has asked a bankruptcy court judge to allow it to terminate labor agreements and pension plans to preserve funds that would enable the airline to continue flying and attract financing so it can exit bankruptcy protection.
Pilots have promised not to contest United's bid to terminate their pension plan in return for various pledges, including contribution requirements and $550 million in convertible notes that could sweeten a future replacement retirement account.
The PBGC saw its deficit more than double to $23.3 billion in fiscal 2004 that ended Sept. 30. The agency blamed the transportation, communications and utilities sectors.
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