United Air Lines says Pension Benefits Guaranty's offer to take over pilots' plan not enough

By Jeff Pines

Washington, Dec. 31 - United Air Lines Inc. said the Pension Benefits Guaranty Corp.'s offer to take over the pension plan for the pilots of the bankrupt airline is not enough.

PBGC is a government agency that guarantees pensions if the issuer terminates the plan.

"The PBGC's decision to seek involuntary termination of United's defined benefit pension plan for our pilots changes nothing with respect to our need to terminate and replace all four of our defined benefit pension plans," United said in a news release.

The PBGC said its financial advisers have concluded the most the airline could handle would be three pension plans.

"As we have stated previously, even beyond termination and replacement of the four plans, we must achieve an additional $725 million in labor cost savings to successfully emerge from bankruptcy as a sustainable, profitable enterprise," the airline said.

The pilots' plan is about 49% funded with $2.8 billion of assets to cover $5.7 billion of benefit liabilities, according to PBGC estimates. Of the $2.9 billion in underfunding, the PBGC expects to be liable for about $1.4 billion in guaranteed benefits. The United pilots plan claim will be the third-largest in the history of the insurance program, which was created in 1974.

With the termination of the United pilots' plan, five of the 10 largest claims in the PBGC's history are now from airlines. Overall, the airline industry accounts for nearly 20% of total PBGC claims but fewer than 2% of insured participants.

The Elk Grove Township, Ill.-based airline and its parent holding company, UAL Corp., filed for bankruptcy on Dec. 9, 2002. Its Chapter 11 case number is 02-48191.

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