State of the Airlines

Thursday, April 21, 2005

NEWS: Senate Bill for Airline Pension Help

Senator Johnny Isakson from the great state of Georgia introduced the Employee Pension Preservation Act of 2005 late Wednesday. There's lots of details but essentially the bill is designed to do two things. First it will save the airlines millions a year by allowing them to spread their pension fund obligations over 25 years instead of 4 years. Second it limits the obligations of the federally run Pension Benefit Guarantee Corp(PBGC) You will recall that US Airways had already dumped their heavily underfunded pension plans on the PBGC and United Airlines has also started the process...and that trend was going to continue.

This legislation was inevitable. It doesn't take a genius to look out across the airline landscape and see more airlines lining up at the bankruptcy entrance. The common thread is that each one would be looking to use bankruptcy to dump their pension plans onto the PBGC. The painful reality is that this load would cause the collapse PBGC requiring a massive (think of billions...lots of billions) bailout.