Today, the Wall Street Journal reports, “United Airlines and a federal pension insurer announced a settlement that would allow the airline to hand over its four underfunded pension plans to the government in the largest corporate-pension default in U.S. history.” The move, which still needs approval by a bankruptcy-court judge, would allow United Airlines to shed $9.8 billion of retirement applications, saving the company $645 million a year for the next five years.
As for United’s employees, they will “receive less than they had expected from the company” as a result of the settlement. The Association of Flight Attendants, representing 15,500 active workers and 5,100 retirees, said it is “morally criminal” for United to abandon its pension promises. It is planning a strike if the bankruptcy judge abrogates the contract.
The point isn’t so much that United Airlines should or should not be able to declare bankruptcy and slough off promised benefits – maybe that really is what’s necessary for the company to become a “competitive enterprise for the long term.” The bankruptcy judge will decide.
The point is UAL is dumping $9.8 billion in retirement obligations on the federal government – in other words, on taxpayers – so it can get on stable financial footing. Besides hurting taxpayers, UAL’s failure to meet its commitements will adversely affect UAL workers. And last week, President Bush signed legislation that will make it more difficult for those same workers to file for bankruptcy and receive the same privilege as United Airlines – that is, of being able to start over when faced with an unforeseen financial crisis.
In General, the legislation will make it harder and more expensive for millions of average Americans to be forgiven trifling sums – most of which would barely make a mark on the $30 million per year credit card industry profits.