Malik Miah, San Francisco
The latest setback for US workers' right to secure retirement pensions occurred in the airline industry with the termination last month of four defined benefit pension plans at United Airlines (UAL), the world's second largest air carrier. The major unions at UAL opposed the terminations but were unable to stop a bankruptcy court from ruling in favour of the corporation's plans to "save" the company.
On May 10, the Illinois bankruptcy court that is overseeing UAL's reorganisation allowed UAL to terminate its four defined benefit pension plans. The ruling means that the Pension Benefit Guaranty Corporation (PBGC), a federal agency, is in control of pensions for 120,000 active and retiree UAL employees. It is the largest pension collapse and takeover in the PBGC's 30-year history.
The first UAL plan to be officially turned over to the PBGC was the "Ground Plan". It covers mechanics and other ground employees. The PBGC only covers about two thirds of UAL's US$9.8 billion pension obligation. The shortfall — a result of ERISA (Employee Retirement Income Security Act of 1974) regulations — means a reduction of benefits for all future retirees and workers who retired since July 2000.
It is common for management and the corporate media to push the line that pensions are simply "promises", as though they fell from the sky. In truth, in both the private and public sectors, defined benefit pensions are benefits negotiated by unions. Workers accept lower wages now in a tradeoff for better pension benefits in the future. To cut pensions or terminate pension plans is simply another way to reduce workers' total wages.
The termination and replacement of pensions at UAL has led to a broad discussion about pensions. At a June 7 Senate finance committee hearing, UAL CEO Glenn Tilton gave his analysis of the pension crisis for airlines.
"The major carriers have massive legacy costs", Tilton told the senators. High on the list of "legacy costs" were an "uncompetitive cost structure, restrictive labour agreements; a lack of alignment between management, employees and customers; and a governance structure that fundamentally weakened United".
The "uncompetitive cost structure", Tilton claimed, includes "restrictive labour agreements" and overly expensive defined benefit pension plans. These had to be restructured, he said, for the company to be saved.
Chapter 11 is a unique US law that allows bankrupt corporations to survive and use courts to tear up labour and other legal contracts. It provided UAL with the tools to rip through its collective bargaining agreements and fundamentally alter its business practices. This included termination and replacement of the pensions and forcing unions to accept concessions in wages and benefits that would have been impossible in "normal" negotiations.
Airline employees waged a heated debate among themselves as to the inevitability of concessions under the bankruptcy process. The issue assumed centre stage late last year when UAL informed the unions on November 4, 2004, that it intended to file 1113c motions before the bankruptcy court to "abrogate" the contracts if concessions were not granted "consensually". The power of the court to allow the company to impose its own terms was not an idle threat.
The six unions at UAL had to decide to negotiate or fight the court motion to "reject" their contracts through legal action or "self help" (strike), even though UAL said a strike would be illegal. That argument is still untested and has no legal precedence.
The pilots union quickly decided it had to make a deal, including allowing UAL to voluntarily terminate its pension plan. The union sought a deal with UAL early on.
The mechanics represented by AMFA (Aircraft Mechanics Fraternal Association, an independent union not affiliated to the national labour federation, the AFL-CIO), the flight attendants, and the baggage handlers/customer service employees — all resisted quick settlements.
The biggest issue was the termination and replacement of the defined benefit pension plans. The mechanics and baggage handlers suffered an involuntarily pension termination on March 11.
Since unions are not formed to destroy the corporation for the employees they represent, all the leaders of the unions, including AMFA, made the decision to negotiate. AMFA did not agree to the concessions or that any employee group should have to pay for years of corporate mismanagement.
The fact of bankruptcy, however, limited AMFA's options. The court would allow UAL to take an annual cut of $96 million for five years of wages and benefits from the mechanics' contract.
The AMFA leadership and its negotiators settled on a strategy to seek an agreement to minimise the impact of the cuts that would otherwise be imposed by the court. Alternately, the union prepared to lead "self help" (strike) action if the members voted for it.
No union had ever organised a strike in a company under bankruptcy. AMFA's membership in fact is the only union membership to reject a tentative agreement in this circumstance, which they did in January. This gave the union's negotiators new leverage to win improved job security language leading up to the May 31 ratification vote.
However, the AMFA leadership rejected the option of refusing negotiations and calling a strike. It concluded that it had an obligation allow the union's members to make that choice after a democratic debate. A decision to strike would be felt well beyond the 7000 active AMFA members — tens of thousands of retirees with pension and health benefits at risk would also feel the impact of such a decision.
The bigger context was also important. UAL had successfully used bankruptcy in 2003 to shut down two maintenance bases (Indianapolis and Oakland) and eliminated thousands of jobs. UAL has been in bankruptcy since December 2002. The issue of survival is still up in the air.
For many employees, working a little longer to make sure "Plan B" is in place was a factor in how they voted on what to do next.
AMFA leaders understood the mixed feelings of the members. There was not a single employee that I spoke to who backed giving concessions to the company if it was a Section 6 negotiation. (Section 6 is the provision under the federal Railway Labor Act for airline/railroad contract disputes/negotiations and resolutions.) In its 40-year history, AMFA had never negotiated a concessionary contract under Section 6. This was its first Chapter 11 negotiations.
The final vote on the Letter of Agreement (LOA) on May 31 was 59% "accept" and 41% "reject".
AMFA, true to its tradition, maintained complete process transparency during the negotiations. It conducted open negotiations that allowed rank-and-file member observers. This open process enabled the membership to follow the ebb and flow of the talks. AMFA is the only union at UAL that does this.
For the first time in UAL labour's history, the actual contract language of the entire agreement was given to each union member two weeks before the ratification vote. In the past, the final language was written months after the vote.
AMFA's leaders also made no recommendation on the LOA. AMFA's policy is that its officials do not make a recommendation on the vote. The officials' reports to meetings of the union's members were purely informational.
The pension debate was handled in a similar manner to all other items under 1113c. The pension issue could not be resolved outside the context of the bankruptcy process and the greater advantage management had because of the third party at the table — the judge.
AMFA's negotiators, like all union negotiators, had to manoeuvre. Once PBGC and UAL had struck a deal that was upheld by the judge, the union strategy changed. AMFA now sought to negotiate the best pension replacement plan as it pursued legal action to salvage what it could from the PBGC.
The issue of pensions, like Social Security (the federal pension program for workers who pay into the system in the private sector), requires governmental action. No single company can solve the crisis. Even General Motors and Ford, the second and third largest automobile manufacturers in the world, face the prospect of pension adjustments and possible terminations.
The lack of national health insurance and national pension plans for all US residents is at the root of the pension crisis. Private and publicly funded pensions suffer from this failure of federal government policy.
[Malik Miah is an airline representative for Local 9, Aircraft Mechanics Fraternal Association, San Francisco, California, and editor of the Local's news magazine Way Points (<http://www.amfa9.org/waypoints>).]
From Green Left Weekly, June 29, 2005.
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