AFA US Airways MEC E-Line for February 28, 2003
"Is Your Pension in Jeopardy?"

This information is also available on our Web Site http://www.afausairways.org

• Is Your Pension in Jeopardy?
• Retirement Matters
• ANU UPDATE
• Flexible Spending Accounts
• US Airways targets pilots' pension plan Bankruptcy judge to decide 
• US Airways gave $35 million in pension payments to top 3 former executives

Is Your Pension in Jeopardy?

Learn about Proposed Changes that Could Affect Your Retirement

The events of the past two years have had a dramatic effect on the financial condition of the airline industry. For those of us employed by airlines or airline-related companies, the present condition and future prospects of the industry are personal and pressing concerns.

Among the most significant of these concerns are the condition of our pension plans and retirement security. This "Pension Primer" addresses these concerns.

Defined benefit pension plans, which have been negotiated as part of airline employee contracts and provide those workers with a modest pension for a secure retirement at most major carriers, are under attack by airline management. Management says the plans are too costly and are underfunded.

Often companies, the press, and government officials point to defined benefit pension plans as the main cause of the pension funding problem. Our pension plans are made out to be the villain, and suggestions abound that the only way for the industry again to be profitable is to terminate costly pension plans and reduce other benefits.

It is important for airline workers to educate themselves about pension basics, to learn the true facts surrounding the current situation, and to share this information and their views with their representatives in Congress.

...To learn more about pensions and retirement, read the "Special Section - Retirement and Pensions" HERE (http://www.afanet.org/retirement/pension_primer.htm)

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Association of Flight Attendants  - Retirement and Pensions - Retirement Matters

As a retired member of AFA, you are a member of the 2.7 million member Alliance for Retired Americans, which is made up of retirees from AFL-CIO affiliated unions.

As an AFA Retiree, you remain eligible for benefits under the Union Plus Program. You can find a brief description of each of these benefits on the AFA International web site.

Inside AFA International's "Retirement Matters" page...

	Introductory letter from Pat Friend, AFA Intl. President
	Money Saving Benefits
	Is Your Pension in Jeopardy?
	Web Resources you can use
	Keep us up-to date!

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From the MEC Hotel Chair - Audrey Lindner

ANU UPDATE

At present, any crewmember with an overnight in Antigua has the option of paying $20.00 for an all-inclusive stay. Please keep your receipt, should this $20.00 be refundable in the future. Originally, the Company requested $40.00. This has been changed.

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Flexible Spending Accounts
If you have a flexible spending account, you must contact the Human Resources Department by March 31 through the 1-800 number prompts 1,4,1. You must send all documentation by March 31, 2003 or you will lose the money in the account.

Any questions about this can be directed to the Human Resources Department.

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US Airways targets pilots' pension plan Bankruptcy judge to decide 
By Barbara De Lollis
USA TODAY

ALEXANDRIA, Va. -- With 10 months left in a 32-year flying career, US Airways Capt. Joe Graham suddenly faces a retirement shock.

Instead of the $175,000-a-year pension he'd counted on, Graham now thinks it could be $90,000, if he's lucky. Or even much less. 

Graham is one of 5,700 US Airways pilots whose retirements may be crushed in the vise of their employer's bigger money troubles. US Airways is asking a federal bankruptcy judge to terminate the pilots' pension plan, freeing the company from about $1.7 billion in pension obligations and possibly clearing the way for its emergence from reorganization in late March. A three-day court hearing on the US Airways' motion is expected to conclude today in bankruptcy court here. 

If the plan is terminated, pilots would receive up to $28,400 a year from the Pension Benefit Guaranty Corp., which insures business pension plans. US Airways also has offered to contribute $850 million to a new scaled-down plan that would pay additional benefits but less than the current plan offers.

While terminating the plan could save thousands of jobs at US Airways, it would be a staggering blow for veteran pilots like Graham. He has three children to put through college, and when he turns 60 in December, he'll hit the mandatory retirement age for airline pilots. The prospect of losing most of his pension comes on top of pay cuts that he says have cut his salary 30% from $275,000 a year. He is one of US Airways' most senior pilots.

''You can rationalize these pay cuts. You can cut your lifestyle back, you can not get a new car, you can cut back on your travel,'' he says. ''But, by God, they're not going to turn me loose at 60 unable to fly at $28,000 a year with three kids.''

Today in bankruptcy court, US Airways will argue that its survival rests on terminating the pension plan. If it doesn't emerge from Chapter 11 next month, it could lose more than $1 billion in financing and a critical deal for processing its credit card sales, which accounts for half its revenue.

''If we don't resolve this issue, there will not be a company,'' says Jack Butler, US Airways' bankruptcy lawyer.

In a sign of how emotionally charged the issue is, more than 100 pilots -- most in uniform -- have packed the bankruptcy courtroom and an overflow room to watch the hearing.

US Airways says it got to this point in part because the weak stock market and low interest rates devalued the current fund's investments and left it unable to meet obligations. 

The situation is still tough. US Airways Chief Financial Officer Neal Cohen testified this week that the airline is losing $2 million a day, and a war could cost it millions more. To afford payments to the pension plan, Cohen said, the company would need to save $600 million elsewhere over the next three years, which he doesn't believe is possible.

The airline tried to find ways to get around the payments, such as stretching them over 30 years instead of seven. But it couldn't get authority from the PBGC or Congress to do so.

The Air Line Pilots Association is expected to mount its challenge today. The union contends that US Airways hasn't explored every alternative, such as trimming the $3 billion to $4 billion that the company expects to spend on regional jets over several years. ALPA also says US Airways' motion raises contract issues that should be settled under labor laws, not bankruptcy laws.

Meanwhile, the issue is stirring distrust among the pilots. Many believe the company is using the savings from their pension to offset contributions to other pension plans, including management's. US Airways denies that.

Pilots were stung by Cohen's testimony Monday that the airline paid $35 million in advance pension payments to former chairman Stephen Wolf, former CEO Rakesh Gangwal and former general counsel Lawrence Nagin before its Chapter 11 filing in August.

Charlie Couch, 58, has been flying for US Airways for 16 years. He says termination could cost half his pension payments. He thinks other aviation jobs will be hard to find because many pilots have been furloughed since the Sept. 11 attacks, 1,800 at US Airways. He and his wife are considering selling their dream house in Chester County, Pa.

''It still feels surreal,'' he says. ''You do your flying. Everything looks normal. Then you realize it's a nightmare.'' 

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US Airways gave $35 million in pension payments to top 3 former executives

Wednesday, February 26, 2003

By Frank Reeves, Post-Gazette Staff Writer

As it was careening into financial ruin and ultimately Chapter 11 bankruptcy, US Airways paid $35 million in lump-sum retirement benefits to its former top three executives.

Stephen Wolf, who ran the airline for seven years and now serves as chairman of the board, received $15 million. Wolf is no longer employed by the carrier. His protégé, Rakesh Gangwal, who resigned as president and CEO in November 2001, also received $15 million, and Lawrence Nagin, the airline's longtime executive vice president and general counsel who retired last March, received $5 million.

Although the payouts apparently took place at the time each of the executives retired, they didn't come to light until this week during a bankruptcy court hearing in Alexandria, Va. Disclosure of the payments was tucked into documents filed with the court last September and October.

During the first half of their tenure, Wolf and Gangwal were praised for their role in turning around an airline that in the mid-1990s teetered on the brink of bankruptcy. But their reputations faded as their growth strategy became undone by a recession that hit all carriers and sharp drop-off in air travel after the Sept. 11 terrorist attacks.

The three men were entitled to receive the retirement benefits as part of the employment contracts they negotiated with US Airways' board of directors. But the payouts drew immediate fire from airline employees suffering from lost jobs, benefits and pay cuts and from some outside analysts.

The payments are yet another example of "outsized compensation to management that borders on looting," said William Lauer, chairman of the Tarentum-based Allegheny Capital Management, a former investor in the airline.

The issue of the retirement benefits was raised this week during a hearing before U.S. Bankruptcy Judge Stephen Mitchell on the airline's request to terminate the pension plan for its unionized pilots and replace it with another plan.

The airline has contended that unless it can reduce its pension expenses -- what it must pay over the next seven years to cover its unfunded pension liabilities -- it won't be able to obtain the federal loan guarantee and equity funding it needs to survive. The airline hopes by scrapping the current plan and replacing it with another, it can significantly cut its expenses.

While being cross-examined by the unionized pilots' attorney, US Airways' Chief Financial Officer Neil Cohen testified that Wolf, Gangwal and Nagin received their million in lump-sum retirement payments.

The Air Line Pilots Association's spokesman, Roy Freundlich, said the testimony, which the union immediately posted on its Web site, confirmed what many pilots suspected: that the airline's top executives were protecting their pensions while sacrificing those of other employees.

The disclosure of the retirement payouts came in a time that has seen the airline's ranks slashed by more than 16,000 and management wrest more than $1 billion in annual wage and benefit concessions from its unionized workers.

The pilots, which as a group have agreed to $565 million in annual concessions, contend that if their pension plan is abolished and taken over by the federal Pension Benefit Guaranty Corp., they could lose as much as 65 percent of their benefits.

This isn't the first time that Wolf and Gangwal have been criticized for their salary and benefits.

In August 2001, when the deal to merge with United Airlines fell through, Wolf, Gangwal and Nagin agreed to forgo their contractual rights to resign that fall -- a move that would have made them eligible for severance packages totaling a combined $45 million. The three made the move amid protests from workers.

In the next month, Wolf and Gangwal came under fire again from labor unions for retaining their full salaries at a time the airline was slashing its work force and seeking concessions from its employees following the 9/11 attacks. The pair later agreed to give up their salaries and benefits for the last 15 weeks of 2001, moves that cost them nearly $200,000 apiece.

In 2000, Wolf's compensation from all sources totaled $11.6 million, including $7.6 million in reimbursement for taxes paid on restricted stock received over the years. Gangwal earned $12.1 million in total compensation, including a $7.2 million reimbursement for tax liabilities.