US Airways said Thursday that it is seeking court approval to terminate its pilot pension plan covering 7,000 people as it reorganizes to emerge from bankruptcy protection.
The company, which has said it can't make all of the $3.1 billion in pension payments due over the next seven years, asked a U.S. Bankruptcy Court for permission to terminate the plan as of March 31. The seventh-largest U.S. carrier said it will commit $850 million over seven years to a replacement plan.
US Airways needs to cut its pension liability to get $200 million in financing from the Retirement Systems of Alabama to gain a $900-million federal loan guarantee to emerge from bankruptcy protection. Termination of the plan would shift responsibility for the retirement payments to Pension Benefit Guaranty Corp., a government agency set up to pay retirement benefits when a plan fails.
US Airways "is between a rock and a hard place," said Robert Mann, president of the airline economics and labor consulting firm RW Mann & Co. "They're saying they don't have the money in the short term" to meet the plan's cash requirement.
Payments through the Pension Benefit Guaranty Corp. would be lower than those provided by the airline. US Airways will seek permission from the pension agency to set up a new plan with pilots that will help make up some of the difference with the $850 million it promised for a replacement plan.