The New York Times has an interesting article here discussing how United Airlines may have to take drastic steps regarding its pension plans in the near future. According to the article, the airline just a few weeks ago said in a bankruptcy court filing that it viewed its pension plans “as untouchable unless there was no other choice.” However, the article states that many now are predicting that United will have to “gut the pension plans” and that there is no other way for United to survive.
The article goes on to make predictions regarding the airline industry as a whole:
Whatever United does will be closely watched by the other major airlines and their employees, who have substantial pensions of their own to worry about. If United ultimately revives itself by terminating one or more of its pension plans, other airlines may also try to shed pension debt, to remain competitive.This would not happen overnight. Pension terminations are difficult and costly. But over time, the industry could find itself in a long, slow race to the bottom – a succession of bankruptcies and pension defaults similar to those in the steel industry over the last quarter of a century. Steel maker after steel maker went bankrupt, and the only ones to bounce back were those that scuttled their pension plans.
Read about another airline’s pension funding woes here.