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April 22, 2005

The U.S. Government Kicks in for the United Airlines Bankruptcy

From Caroline Daniel of the Financial Times:

FT.com / Transport / Airlines - US to assume pension plans at United : United Airlines has reached an agreement with the federal agency that insures defined benefit pension plans to transfer $6.6bn in pension liabilities, marking the biggest pension transfer to the government.... The agreement with the Pension Benefit Guarantee Corporation comes after United reached an impasse with some unions over its need to terminate pension plans.... According to the PBGC, United's pension plans are underfunded by $9.8bn. Of this, the government will assume $6.6bn in liabilities, with the shortfall representing the loss in promised pension benefits for employees. The PBGC's largest previous claim was in 2002, when Bethlehem Steel terminated its defined benefit plans, at a cost of $3.6bn.... The agreement, which needs approval from the bankruptcy judge, would make the PBGC the trustee of four separate defined benefit plans at United. Further details which could include the PBGC being granted an equity stake in United will be released next week, ahead of a court hearing on May 4...

Posted by DeLong at April 22, 2005 07:31 PM