=20 ---------------------------------------------------------------------- This article was sent to you by someone who found it on SF Gate. The original article can be found on SFGate.com here: http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2003/02/21/f= inancial1908EST0329.DTL ---------------------------------------------------------------------- Friday, February 21, 2003 (AP) Airline says it must drop pension plan to avoid liquidation MATTHEW BARAKAT, AP Business Writer (02-21) 16:08 PST ALEXANDRIA, Va. (AP) -- US Airways told a bankruptcy judge Friday that the company faces almost imminent liquidation if it is not permitted to terminate the pension plan for its 6,000 pilots. The bankrupt airline faces a $1.6 billion gap over the next seven years between its pension assets and its liabilities, the company said Friday. Resolution of the issue is the last major hurdle it faces to meet its goal of emerging from bankruptcy by the end of March. But the pilots, who have suffered 1,800 furloughs and have already agreed to $565 million in annual wage concessions to try to keep the company afloat, say termination of their pension is too much to bear. Nearly 100 pilots attended Friday's hearing to show their displeasure. "We have already sacrificed a lot," said Bob Lamborn of Kennett Square, Pa., a US Airways pilot for 17 years. "To have them come after our pension now, it's a personal affront." If US Airways gets what it wants, the federal Pension Benefit Guaranty Corp. will take over the plan. In that case, most pilots would receive a pension no greater than $28,500 a year. That would be supplemented with a new, replacement pension plan implemented by the airline. But the new pension plan would provide defined contributions instead of defined benefits. That means an older pilot would have little time to accumulate savings, while younger pilots would have to a hope for a strong stock market to build a significant nest egg. If the old plan were to remain intact, most pilots would receive an annu= al pension of $50,000 to $70,000. Some are in line to receive $100,000 or more. Pilot Dave Ciabattoni of Wallingford, Pa., estimated that his overall pension will at best be cut in half under US Airways' proposal. He said he did not believe the company's assertion that resolving the pension issue is the airline's final hurdle to financial stability. "If the difference between solvency and liquidation is this issue, then the company is going to liquidate," he said. "The pilots alone can't save this company." Many pilots said they also resent the fact that none of the other unions are being asked to sacrifice their pensions. The airline says the pilots' plan is the only one big enough to provide the savings it needs. US Airways lawyer John W. Butler Jr. said he sympathizes with the pilots, but terminating the plan is necessary to the airline's survival. "These pilot benefits will never be paid at those (original) levels. They are gone and nobody will get them," Butler said. "If we do not resolve this issue on a timely basis, there will be no airline." The Retirement Systems of Alabama, a pension fund for public employees in that state, is the airline's main financial sponsor and is in line to take a controlling stake in the airline upon its emergence from bankruptcy. The pension fund is withholding $200 million in financing until the pension issue is resolved, and Butler said the airline recently missed debt payments as a result. The airline won a small victory Friday when U.S. Bankruptcy Judge Stephen Mitchell agreed to hear testimony on the issue. Lawyers for several groups of retired pilots had contended that the judge did not have authority to rule on the issue and that it should be submitted to arbitration. Testimony is expected to continue next week, with witnesses including US Airways chief executive David Siegel. =20 ---------------------------------------------------------------------- Copyright 2003 AP