Pensions hijacked: Bankruptcy scam rips off 119,000 United workers

>Archive - PWW Print Edition Archive - 2005 Editions - May 21, 2005


 

CHICAGO — “You might see me coming down the aisle 20 years from now with my walker,” said flight attendant Melissa Madden. Faced with the slashing of their pensions to the tune of $6.6 billion, she and other United Airlines flight attendants here warn that if United gets away with using bankruptcy to dump its pension obligations, the nation’s entire defined-benefit pension system — and the futures of the 44 million workers it covers — could come tumbling down. Retirement for American workers could become a thing of the past.

In an interview at the Association of Flight Attendants-CWA office near O’Hare Airport, Madden didn’t dwell on the personal crisis brought into her life on May 10 when a bankruptcy judge gave the airline the go-ahead to renege on its debts to 119,000 United employees and retirees. The judge ordered the remaining assets in United’s four pension funds turned over to the federal Pension Benefit Guaranty Corp., which will assume responsibility for United’s pensions.

The daughter of a pilot, Madden left a teaching job to go to work for the airline in 1978. In the 1990s, “I was looking forward to retirement at age 50 with $2,300 a month,” she said. United cleared $662 million in net profits in 1995. In 1996, the total surpassed $1 billion. In both 1997 and 1998 it was $1.3 billion. During those high-profit years, the flight attendants and other unionized workers bargained for benefit packages that included pensions.

Madden said she fulfilled her part of the bargain. “It was a wonderful job,” she said, breaking into a smile. “My parents taught me to be loyal to the company and work hard, and I did. I had a contract that said I would be able to retire without fear of being homeless or not having enough to pay my medical bills.”

But after United stopped reporting profits, employees were hit with two rounds of contract concessions drastically cutting jobs, wages and benefits. Now, after the PBGC takeover, Madden can look forward to only $1,130 a month. “I have to rethink my future,” she said. She’s weighing selling her condo, downsizing her life or “leaving the career I love.” But, she worries, “what is the economy like for 50-year-olds?” She also wonders if the PBGC payment will be there if other airlines and businesses with big pension liabilities like General Motors follow suit and dump more pension obligations onto the PBGC.

With billions of dollars going through United’s bank accounts every year, where is the money airline workers earned for the company over the decades?

Madden and union spokesperson Chris Clarke blame inept management and enormous executive bonuses. The bankruptcy process itself is a boondoggle, with law firms set to collect over $200 million.

But economists point to additional systemic problems. Even during the years United was reporting record-breaking profits, the value created by airline workers was being drained off.

Corporations like United are structured to depend on Wall Street finance capital to lend them money for operating cash, said Wadi’h Halabi, an economics columnist for this newspaper. Paying the interest on the debt effectively transfers their profits to the banks that lend the money.

Airlines also make exorbitant payments to lease aircraft from a General Electric subsidiary. The payments show up in GE’s profit columns. “Airlines may be entering their fifth consecutive year of losses,” wrote Business Week, “but for GE, the good times keep rolling.” Creditors like GE can call the shots. They insisted on wage cuts for United’s employees.

Perhaps the greatest rip-off is the skyrocketing price of fuel. Fuel is one of the industry’s major costs. Since neither the cost of drilling nor that of refining has increased, all of these “losses” for airlines are pure profits in the bank vaults of the oil monopolies.

Madden and Clarke see a tie-in between the push to privatize Social Security and the assault on their pensions. “Because we’ve gone to a global economy, once you’ve got that mindset, it’s all about cutting costs, “ said Madden. “It’s an awful race to the bottom.” Clarke added, “Under the Bush administration Wal-Mart philosophy, employees are liabilities, not assets.”

The flight attendants and other airline workers are far from defeated. “There is no more to give,” said Madden, her cheerful face turning stony. She left the interview to hop on a plane to Washington — as a passenger — to join a massive lobbying effort for passage of HR 2327, which would retroactively halt assignment of pension funds to the PBGC for six months. That would allow the flight attendants time to make their case that there is no just cause for their fund to be terminated.

Rep. George Miller (D-Calif.) one of the bill’s authors, warned that unless Congress acts, “All the major carriers will look to the United agreement to see if they can cut their own costs by dumping their workers’ pensions. And after the airlines, other industries will look to do the same thing.”

rwood@pww.org