What is the obligation of a company to adequately fund its pensions? Apparently, not much. United Airlines has made the news over the last couple of days as their pet bankruptcy judge released them from their horrendously underfunded employee pension plans. Of course, the plans wouldn't have been quite so ridiculously short of money if United hadn't stopped putting money into them when they filed for Chapter 11 around two years ago.
Luckily for the employees, the US taxpayers will get to pick up the tab via the PBGC, which will end up paying United employees around two thirds of what they thought they had agreed to when they got hired. Except for the pilots, who will get more like 25 percent because their pensions were larger and they are required to retire earlier. In return, the PBGC will get some IOU's from United which will almost certainly turn out to be worthless, as United tips into oblivion.
US Airways pulled this same trick during their first trip into Chapter 11. They are now deep into their second try. Nobody seriously expects them to make it out.
Here's the really cool part:
Glenn Tilton, United's CEO, received 1.1 million dollars
in salary and bonuses
last year. Bruce Lakefield at US Airways got $425,000 in salary and 760,000 shares of (probably worthless) stock. But the BOD made it up to him by promising him triple his annual salary
if the company is sold or goes belly up
It gets even better. These irresponsible and poorly run companies are not alone. Would you like to know how much money the entire airline indusry made during its six most profitable years in history?
Now, how much do you think this same industry has shorted its employees
on the pensions they were promised?
Do you think that there is even the slightest chance that any of these companies will make good on their pensions? Do you think that any major airline with these obligations won't enter Chapter 11 to take advantage of this taxpayer funded windfall? Do you think that there might be another company or two
that will likewise take advantage of this generous option?
I think I know the answer.