US Airways has met the financial standards for a distress termination of the defined benefit pension plan for its pilots, as determined by a decision rendered this evening by Judge Stephen S. Mitchell of the U.S. Bankruptcy Court for the Eastern District of Virginia in Alexandria following the completion of a four day hearing.
The court`s finding completes the requirements for the Pension Benefit Guaranty Corporation (PBGC) to begin consideration of its separate approval process to formally terminate the existing pilot pension plan by March 31, 2003, in conjunction with US Airways` planned emergence from bankruptcy protection set for that same day. At today`s special session of the Bankruptcy Court, Judge Mitchell also authorized US Airways to implement a defined contribution pension plan on terms to be worked out between the company and Air Line Pilots Association (ALPA). Separately, Judge Mitchell determined that the issue of whether ALPA and the company had agreed to formal termination of the pension plan in December 2002 was a “close call” and deferred determination of that issue to arbitration under the Railway Labor Act.
US Airways filed its formal notice to terminate the pension plan with the PBGC on Jan. 30, 2003. The PBGC earlier suspended processing of the formal termination as a result of a grievance filed by ALPA pending its resolution. In a filing with the Bankruptcy Court, among other matters, the PBGC advised the Court that while the ALPA grievance was being resolved, the Court could proceed to consider and render the decision made this evening, the required 60-day pension termination notice period would continue to run, and the PBGC would continue to review the distress termination information submitted by US Airways.
In response to this decision, David Siegel, US Airways president and chief executive officer, said that US Airways and representatives of ALPA should begin immediate negotiations.
“The company remains committed to providing $850 million over the next seven years to fund a new pension plan for our active pilots,” said Siegel. “We have taken the steps to terminate the existing plan only after we had exhausted all other alternatives. But as we demonstrated to the court over four days of testimony, we cannot meet the financial obligations of the existing plan and emerge from bankruptcy protection without taking the action.”
Siegel reiterated comments from his testimony in court on Friday when he said that the airline`s pilots had shown tremendous leadership and sacrifice throughout the company`s restructuring process. “We regret the impact that the plan termination will have on our pilots but the ultimate goal must be to save this airline and the jobs of almost 35,000 dedicated employees. We respect ALPA`s efforts to represent the interests of its members and believe we can find a mutually achieved solution to implement a new pension plan.”
US Airways filed for Chapter 11 protection on Aug. 11, 2002, to complete its financial restructuring andhas kept to a fast-track timetable to emerge from bankruptcy on March 31, 2003. “Unfortunately, our airline was the first to go through a restructuring in the post-September 11 environment, but we are now seeing every other major network carrier going through its own version of this difficult process. With the threat of war looming and the industry in turmoil, we need to get out of bankruptcy protection very quickly to secure the financing capital and federal loan guarantee that we can only access after we emerge from Chapter 11,” said Siegel.