United Airlines, pension regulator reach settlement

New York, April 22 - UAL Corp. and the Pension Benefit Guaranty Corp. said they reached a settlement over termination of the company's pension plans.

Under the proposed agreement - which must by approved by the U.S. Bankruptcy Court for the Northern District of Illinois - the pension regulator will terminate UAL's four pension plans and become trustee. The agency's claim against the company would be settled.

The PBGC said it believes the settlement is better than it would have received as an unsecured creditor in the bankruptcy.

Together, the pension plans are underfunded by $9.8 billion on a termination basis, the PBGC said. Of the total $6.6 billion of which is guaranteed.

The four plans are: the UA Pilot Defined Benefit Plan, which covers 14,100 participants and has $2.8 billion in assets to pay $5.7 billion in promised benefits; the United Airlines Ground Employees Retirement Plan, which covers 36,100 participants and has $1.3 billion in assets to pay $4.0 billion in promised benefits; the UA Flight Attendant Defined Benefit Pension Plan, which covers 28,600 participants and has $1.4 billion in assets to pay $3.3 billion in promised benefits; and the Management, Administrative and Public Contact Defined Benefit Pension Plan, which covers 42,700 participants and has $1.5 billion in assets to pay $3.8 billion in promised benefits.

"We believe that this agreement, under the circumstances, is in the best interests of the pension insurance program and its stakeholders," said PBGC executive director Bradley D. Belt, in a news release.

"The PBGC has an obligation to reduce its losses for the protection of workers and retirees, other companies that pay insurance premiums, and taxpayers. By reaching a settlement now, we further that goal."

UAL, the Chicago-based parent of United Airlines, said the agreement resolves one of the major outstanding issues before it can exit Chapter 11.

"While the company's first choice was to resolve pension issues consensually with all of its unions, unfortunately no viable solutions were offered or found over the past many months," UAL said in a statement.

"In the event that United and its unions are able to find a viable alternative to termination and replacement of their defined benefit pension plans prior to this agreement taking effect, the agreement would allow United to pursue that alternative.

"If approved, the agreement will streamline the trial that is scheduled to begin on May 11, allowing the trial to focus solely on issues related to 1113(c)."

The PBGC also noted that the agreement "highlights the need for the comprehensive pension reform."

As of Sept. 30, 2004 it had a $23.3 billion deficit on its balance sheet, with $39 billion in assets to pay $62.3 billion in guaranteed pension benefits to more than 1 million workers and retirees.

UAL filed for bankruptcy on Dec. 9, 2002. Its Chapter 11 case number is 02-48191.

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