When they took their pensions crisis to Capitol Hill recently airline chiefs found little sympathy from Washington’s political elite but considerable blame.
Even as pension and retirement funds increasingly grasp public attention, the airlines can expect cold comfort to gauge by reaction on the Hill. As Congress begins to address the White House proposal to restructure the nation’s retirement system, lawmakers are vulnerable if they are perceived to favour airlines with special treatment.
In a hearing into the recent default by United Airlines on nearly $10 billion in pension obligations, a key Senate panel heard that the rules let United make its plans look relatively healthy in recent years because the law did not compel it to make cash contributions despite the declining health of the plans. It was the largest corporate pension failure in US history.
The Senate finance committee chairman Charles Grassley said United used legal but “fuzzy math” to “hide and disguise” the true value of its sinking funds. He added: “Airlines promised benefits that were too rich, and they and their unions refused to rein in those benefits even after it became painfully clear that the companies could not afford them.”
The chief executives of Delta and Northwest Airlines told Grassley that without pension relief, bankruptcy was a real possibility, while United’s chief executive said that pension liabilities were the main reason why the carrier could not find investors to fund its exit from bankruptcy. The “Upper Body”, as the Senate calls itself, seemed inclined to believe that airline mismanagement and greed was responsible for the situation, as anger at deteriorating service and worker layoffs combined with their frustration.
Senator Jim Bunning demanded to know why “we should reward lousy management” with pension reform. Bunning’s state of Kentucky is home to many workers at Delta’s Cincinnati/Northern Kentucky International Airport hub. When Delta chief executive Gerald Grinstein started to answer, Bunning cut him off and said: “You’re going to listen!” Grinstein’s reply was brief: “Yes, sir.”
Another senator, Ron Wyden, said that executives piled up lucrative personal retirement deals while they were cutting worker pensions. Wyden said he plans to prohibit executives from protecting their own pension plans.
If their prospects for relief found few sympathetic Senate listeners, airlines can hardly hope for a warmer welcome on the other side of Capitol Hill, in the House. The leading representative in the debate over private pensions opposes “any industry-specific relief” to help the carriers with their underfunded pension plans. But Republican John Boehner, who is chairman of the House Education and Workforce Committee, said he will “work with” lawmakers to help airline employees and retirees.
DAVID FIELD WASHINGTON
Source: Airline Business
