WASHINGTON, D.C. - Last night, United States Senator Frank R. Lautenberg (D-NJ), along with a bipartisan group of his colleagues, sent a letter to the head of the Pension Benefit Guarantee Corporation (PBGC), asking him to explore the possibility of restoring the terminated employee pension programs at U.S. Airways, in light of the airline’s substantially improved financial circumstances. The employee pension plans, which were under funded by $4.8 billion at the time of their termination, have since been assumed by the PBGC.

By law, PBGC has the authority to take such action if a company’s financial situation is improved. Earlier this month, US Airways offered to purchase the larger Delta Airlines for some $10.2 billion, including $5 billion in cash.

“If US Airways now clearly has ability to generate considerable cash and has easy access to credit markets, the company’s ability to restore its terminated pension plans must be fully explored. This is especially true in light of the fact that PBGC regulations would permit the restored plans to be funded over a period of up to 30 years, which is an even longer funding period than airlines are afforded under the Pension Protection Act of 2006,” the lawmakers wrote.

"The Federal government shouldn't allow a company that dumped its pension responsibilities buy another," said Lautenberg. "US Airways should take care of its employees before taking over another airline."

Senators Johnny Isakson (R-GA), Maria Cantwell (D-WA), Saxby Chambliss (R-GA), and Patty Murray (D-WA) also joined Lautenberg in signing the letter.

The full text of the letter follows:

January 29, 2007

Vincent K. Snowbarger
Interim Director
Pension Benefit Guaranty Corporation
1200 K Street, N.W.
Washington, DC 20005-4026

 

Dear Mr. Snowbarger:

We write to request that you evaluate restoring the employee pension plans of US Airways in light of the substantially improved financial position of the company. These employee pension programs were terminated over the last several years as a means of improving the survivability of the airline, but the airline is in a much different position today.

We understand that the Pension Benefit Guarantee Corporation (PBGC) has authority to restore a terminated pension plan when appropriate and consistent with Employee Retirement Income Security Act (ERISA). Furthermore, we understand that “improved financial circumstances” of a company is a key basis for restoration of a terminated pension plan.

It is apparent that US Airways' financial circumstances have greatly improved since it terminated its pension plans with estimated unfunded liabilities of approximately $4.8 billion. US Airways has reported a profit of $292 million through the first three quarters of 2006 (versus a $276 million loss for the first three quarters of 2005). Also, as of the end of the third quarter of 2006, US Airways reported cash and investments of approximately $3 billion.

In addition, US Airways has offered to pay $10.2 billion - including $5 billion of cash - to buy the much larger Delta Air Lines, further demonstrating US Airways' ability to bear the cost of its terminated pension plans. Indeed, it is striking that the $5 billion in cash being offered as part of the hostile Delta offer exceeds the full amount of the unfunded liabilities recently transferred to the PBGC. Certainly, neither the PBGC, other employers paying premiums to the PBGC, innocent pensioners, nor taxpayers should bear billions in costs to enable companies to buy out their competitors.

If US Airways now clearly has ability to generate considerable cash and has easy access to credit markets, the company’s ability to restore its terminated pension plans must be fully explored. This is especially true in light of the fact that PBGC regulations would permit the restored plans to be funded over a period of up to 30 years, which is an even longer funding period than airlines are afforded under the Pension Protection Act of 2006.

For these reasons, we request that the PBGC explore restoration of US Airways' terminated employee pension plans.

Sincerely,

Frank R. Lautenberg (D-NJ), Johnny Isakson (R-GA), Maria Cantwell (D-WA), Saxby Chambliss (R-GA), and Patty Murray (D-WA)