Originally Posted by
RJSAviator76
Lew, I'm not 100% sure, but I believe the PPA in 2006 made it so the taxpayers can still partially bail out the company's pension liabilities, and they tightened up the amount by which the company can underfund the plan requiring the companies to provide more cushion during good times. But is that enough? A major downturn in the market would still require the company to make up the losses and it's still difficult to account for that, and especially during the bad times. Imagine if Southwest had to make up the difference after COVID hit and the markets tanked... it's bad enough that our revenues dropped so dramatically, now imagine the increased cost of having to make up the pension liability due to market drop. I know the new law would have made it be a tad stronger in good times, but think of the bean counter reaction during the drop. As I mentioned in my previous post, think it's bad now that people vote yes on substandard contracts, you should have seen the dumpster fire when the A-plan was under threat. It was a fire-sale on pay rates and work rules all in the name of protecting the A-plan. Everyone gets sold down the river to protect the pension.
Another point is the Chapter 11 threat. The basic premise of the Chapter 11 hasn't really changed. If you look at our own non-qual plans, they're the at-risk plans if we were to go into Chapter 11, much like our A-plan would be. The reason why you may be thinking it may not be as beneficial to go into Chapter 11 nowadays is because A-plans have been primary targets in Chapter 11 and with the exception of UPS and FedEx, all pilot groups have transitioned to defined contribution plans. Furthermore, it's a lot easier to obtain concessions from employee groups via negotiations than going through Chapter 11, but it's still a viable tool for the management - if you recall, Republic filed for bankruptcy to get itself out of 50-seat deal while still being a healthy company.
I'd really need to dig into it deeper, but as human race, we are prone to not learning from the past mistakes.
Agreed, A-plans get problematic at exactly the wrong times as in the early 2000's, due to a frothy market, the US Gov limited the amount of profits that could be directed towards A plan contributions, Delta even asked for a waiver at one point to extra-fund which was subsequently denied, feds want their tax revenues......then a few years later, market is down, profits are gone and Delta expected to make excess contributions to cover market losses, and the feds are like "why aren't you properly funding your retirement plans????"