US AIRWAYS Federal official says pension proposal puts funds at risk
US Airways wants to pay its pension liabilities over three decades instead of seven years.
WASHINGTON (AP) -- A plan to help bail US Airways out of bankruptcy by extending its employee pension payments would risk retirement security for 44 million Americans, federal officials told a U.S. Senate hearing Tuesday.
But Pennsylvania's two senators, pushing to revise federal tax laws to give the financially embattled airline a 30-year cushion to pay $3.1 billion in pension obligations, fired back that the federal benefits fund would pick up the bill anyway if US Airways goes belly up.
At issue was legislation by GOP Sens. Arlen Specter and Rick Santorum, who are trying to help bring the Arlington, Va.-based airline out of bankruptcy by the end of March. The lawmakers want the federal Pension Benefit Guaranty Corp. to let US Airways pay its pension liabilities -- mostly to the airline's pilots -- over three decades instead of by the seven-year deadline it is now facing.
In testimony in front of a Senate Appropriations subcommittee hearing, PBGC executive director Steven A. Kandarian maintained that stringing out the payments would risk the stability of the 35,000 pension plans nationwide that the federal fund protects. Moreover, he said, the plan would give US Airways an unfair advantage at a time when other companies are grappling with high pension costs.
Kandarian also maintained that the PBGC does not have the jurisdiction to revise the law -- a charge that Specter promptly called on former Labor Department solicitor William Kilberg to dispute.
The PBGC "does not desire such expanded authority," Kandarian said, because it would put at risk the retirement security of 44 million Americans whose pensions are insured by PBGC."
At one point, Specter, who chaired the hearing, lost his patience.
"Do you have any factual reason to believe that US Airways would not be successful in its proposed plan?" Specter asked Kandarian.
"I've seen their numbers and it is a tight plan," Kandarian answered.
Specter replied: "Tight, but no factual reason it won't work. Right?"
Said Kandarian: "I think I'll stand by my answer, Senator."
"Well, that would be fine if I knew what your answer was," Specter retorted.
US Airways, the nation's sixth-largest airline, was the first to file for bankruptcy in the wake of the travel industry slump after the Sept. 11 terrorist attacks. The company is carrying a $61 billion debt, lost $2.1 billion in 2001 and has said it needs to cut costs by $1.6 billion to remain viable.
An estimated 17,000 of US Airway's 32,000 employees work in Pennsylvania. Its hubs are in Philadelphia, Pittsburgh and Charlotte, N.C.
The airline is set to appear in bankruptcy court Thursday to seek approval for the reorganization plan it outlined last month. That proposal largely hinges on a $1 billion loan guarantee from the Air Transportation Stabilization Board that has been tentatively awarded on condition that US Airways settles its massive pension obligations.
PBGC will take over US Airways' pension plans if the airline is forced to liquidate. If that happens, pilots face losing up to 75 percent of the anticipated retirement benefits, said Capt. Duane E. Woerth, president of the Air Line Pilots Association.