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Old 06-25-2005, 06:44 AM   #1  
Gordon C
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Default House acts to block UAL pension takeover

House acts to block takeover of United pensions

June 25, 2005

BY MARY WISNIEWSKI Business Reporter
Chicago Sun-Times

The U.S. House of Representatives Friday adopted a provision to block a federal agency from taking over the pension plans of bankrupt United Airlines, but it is unclear how big a threat the move represents to United's restructuring.

A U.S. bankruptcy judge in Chicago last month approved an agreement to have the Pension Benefit Guaranty Corp. terminate and take over $6.6 billion of employee pension obligations.

The amendment, attached to a funding bill, was sponsored by Jan Schakowsky (D-Ill.), Rep. George Miller (D-Calif.) and Rep. Joseph Crowley (D-N.Y.). Thirty-one Republicans joined Democrats for a vote of 219-185.

"Our amendment would give Congress a chance to work out a better solution than pension termination," Schakowsky said in her floor statement.

A spokesman for U.S. House Speaker Dennis Hastert (R-Ill.) said the amendment would lead to "further financial instability and cause the hard-won progress with United's unions to unravel."

The Senate is expected to look at the bill later this summer.

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The impact of the provision is uncertain, as the PBGC is not funded by general tax revenues, but by insurance premiums from employers with pension plans.

The situation is confusing because Congress does have the authority to control certain aspects of how the PBGC can spend its money, according to Douglas Elliott, head of the Washington-based Center on Federal Financial Institutions, a non-partisan group that tracks pension issues.

"I tend to think this is a symbolic vote, not something that will end up having force of legislation," Elliott said. "The administration will very much oppose it."

United said it needs to terminate its pension plans in order to exit bankruptcy. The transfer affects about 120,000 United Airlines workers and retirees, many of whom would lose thousands of dollars a year in benefits if the PBGC transfer took place.

If the Miller provision did become law, it could jeopardize United from getting out of bankruptcy, said Ray Neidl, an airline analyst with Calyon Securities.

"Let's hope that it's just being done for public appearances, and the company can save everyone's job and get this thing moving," Neidl said.

United Airlines spokeswoman Jean Medina said in a statement that Friday's vote has no immediate impact on United's restructuring.

PBGC spokesman Jeffrey Speicher said the agency is analyzing the amendment's impact should it become law.

United's flight attendants union called the vote "a significant win."
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