Chicago, Ill.
UAL Corp., the parent company of United Airlines, Inc., filed for bankruptcy on December 9, 2002. Since then, the Air Transportation Stabilization Board has on three occasions denied the company’s requests for financial backing, contrary to Congress’ purpose in creating the $10 billion fund the ATSB administers—to help out airlines hard hit financially because of the September 11th terrorist attacks. At this point, United is not likely to emerge from bankruptcy until sometime next year.
Unionized employees of United Airlines have made enormous sacrifices to help the carrier shore up its finances. Workers’ economic concessions totaling nearly $13 billion between 2003 and 2009 have left United with some of the lowest labor costs among the major airlines.
Notwithstanding its workers’ good faith efforts, United has repeatedly employed cost-cutting schemes that break faith with its current employees and retirees. The company unilaterally decided to shave costs by cutting retiree health benefits for already-retired workers, including many individuals lured into retirement relatively recently with the understanding they would receive the same benefits as existing retirees, not the reduced benefits negotiated for future retirees.
More recently, United’s management halted legally required contributions to its employee pension plans, failing to make $72 million in contributions that were due on July 15, 2004. And now, United has announced that, pursuant to an amended bankruptcy financing agreement it negotiated with its creditors, including Citigroup and J.P. Morgan Chase, it will make no additional pension contributions before exiting bankruptcy. Unless its plans change, the company will miss $568.4 million in required pension contributions in 2004 alone.
Attacking its employees’ pension plans is not a strategy for strengthening the company and building for the future. By not making legally required contributions to workers’ pension funds, United is digging a deep hole that seems designed to make it all the more difficult for workers’ pensions to survive bankruptcy, putting the future economic security of more than 100,000 retirees and current employees at risk. And, if the company’s maneuver succeeds, it will set a dangerous precedent that other airlines, and employers in other industries, will seek to follow, further threatening the already fragile retirement security of millions of Americans.
There is blame to spread all the way around for the precarious situation United’s employees and retirees now face, from the refusal of Bush Administration ATSB appointees to sign off on loan guarantees, to creditors’ supposed insistence that United not make further pension contributions, to the company’s all-too-eager acquiescence in this condition. But meeting obligations to United’s employees and retirees is, first and foremost, United’s responsibility, and company management should not try to hide behind its bankruptcy financing agreement to rationalize shirking these obligations.
The time for game-playing is long past. United management must deal forthrightly with its workers and their unions. The company should abandon self-serving platitudes about the financial markets and creditors and work with—not against—its workers and their unions to protect their hard-earned pensions. As Frank Lorenzo learned more than a decade ago, attacking workers is not a strategy for success. The survival of United itself may depend on whether its management team can learn that lesson in time.