State of the Airlines

Tuesday, February 15, 2005

NEWS: Northwest Airline Pilots May Offer to Freeze Pension

The pilots Northwest Airlines, represented by ALPA, are paying attention to what's happening at their airline and in the industry. They realize that their current pension plan is probably going to end up under-funded as many other pilot pension funds have in the industry. That means the retirement benefits those pilots are planning on might not be there for them in their golden years. So the union is proactively looking into freezing the pilots pension plan. A freeze normally means new members will no longer be accepted into the existing plan and the airline will no longer make contributions to that plan. New members will get picked up under a new pension plan that the airline can afford. Keep in mind that this a general statement, the details regarding what ALPA and Northwest plan to do have not been released.

Couple of important things to recognize here.

First, kudos to ALPA for getting proactive on this. This is what a union is supposed to do, protects its members by working with the airline. They are doing so in a manner that builds a working relationship between the airline and the union...something that has been lacking at Northwest in the past.

Second, let's not forget that part of the reason the pension plan is in trouble is because a good portion is funded by airline stock. From the airline's perspective this makes sure that the pilots have a stake in the well being of the airline. But it also means that external forces can decimate pension fund values. Then again, so can a bad business plan. Its a tough, but common, situation that is impacting everyone in the airline industry.