United Airlines Terminates Pensions in Bankruptcy

USA TODAY reports that a bankruptcy judge has approved United Airlines' request to terminate its pension plans, which will result in the largest corporate pension default in history. The federal Pension Benefit Guaranty Corporation will now be responsible for covering UAL's $645 million in pension payments. Although the PBGC claims that taxpayer dollars are not used for this purpose, the burden eventually makes its way back to American citizens via higher insurance premiums, etc.

Once again, in the wake of the bankruptcy "reform" bill that President Bush signed last month, a major U.S. Corporation is doing exactly what the banks and credit card companies claim is a plague unique to individuals customers: using bankruptcy as a "financial planning tool". The bankruptcy "reform" bill does nothing to stop this corporate abuse of the bankruptcy system.

And what does United Airlines CEO Glenn F. Tilton receive as compensation for piloting his airline straight into the ground? According to SEC documents, Mr. Tilton received the following compensation in 2004:

Salary: $756,832
Bonus: $366,393
Other Annual Compensation: $27,910
All Other Compensation: $8,481

According to my abacus, that totals $1,159,616 in annual compensation--including a $366,393 bonus--for leading his company into bankruptcy.

Fortunately, Mr. Tilton and the CEO's of other bankrupt airlines can blame high fuel prices for their failure--a convenient escape that is not available to ordinary working folks who default on credit cards and other bills in part because the cost of transportation to work has risen faster than the income they earn by working.

There's just one little problem with blaming high fuel prices for United Airlines' bankuptcy: Mr. Tilton's previous job was CEO of Texaco Oil, and before joining UAL he was interim Chairman of Dynegy Inc.--an energy company involved in the California energy crisis and Enron fiasco. Did he learn nothing at all while running oil and energy companies, or is he himself partially responsible for rising fuel prices that have enriched him as CEO of a bankrupt airline? Remember, corporate bankruptcies usually benefit the executives of the corporations that go bankrupt because corporations abuse the bankruptcy system as a "financial planning tool".

So where will all those hard-working, long-suffering United Airlines employees spend the twilight of their years on earth now that their pensions are in the competent hands of the U.S. government? For many, it will be the American Debtors Prison. The only good news for them is that they won't be sharing a cell with Glenn F. Tilton.

All the best,
Paul