“UNITED AIRLINES PENSION PLAN WOES”
An event in the headlines today that will require human resource involvement is United Airline’s decision to most likely terminate all of its employees pension plans due to bankruptcy and turn them over to the PBGC or Pension Benefit Guaranty Corporation. The PBGC is a federal agency that insures traditional pensions in case companies go “belly up”. Basically what this amounts to is that United Airlines worker’s retirement plans could be cut by up to 75 percent. The decision to end the pension plans by United Airlines is stated as “creating the biggest default in U.S. history and forcing a possible bailout” (The Christian Science Monitor, Alexandra Marks).
This issue is not exclusive to United Airlines workers but to any employee who works for a company suffering from financial troubles. If United goes through with ending the pension plans, it is feared that the other airlines currently suffering financial troubles will soon follow suit. Because of globalization and competition from low-wage companies that do not offer company paid pension plans, the responsibility for retirement security may shift from the airlines to the individual workers to take care of. Advice from Brad Belt, executive director of the PBGC is that “It’s incumbent on individuals to be well informed, prudent about their investments, and to save accordingly.”
Union members are angry because United Airlines went behind their backs and reached the agreement with the PBGC without their knowledge. Additionally, the agreement will put a lot of pressure on the PBGC, which is already in the red more than $9 billion dollars. United Airlines could stick the PBGC with an additional $8.4 billion dollars in unfunded obligations. Ultimately, if more companies follow suit, it could saddle the government insurance agency with enough debt that it will need to involve Congress in terms of a bailout.
One human resource issue facing United Airlines pilots is that by law, pilots must retire by age 60. Most of the United Airlines pilots who planned on retiring at 60 years old will probably now be forced to look for another job.
Another human resource issue stemming from this United Airlines decision is the angered and frustrated work force. These employees are going to work everyday disgruntled and outraged. The fact that the company CEO is guaranteed a pension plan of over $4 million dollars is not going over well with the workforce either, especially since he has only been with the company approximately 2 years and it is obvious that he has not been able to turn things around financially. There is talk of strikes by the aircraft mechanics union and flight attendants this week, which will only weaken the financial situation and relations between United Airlines and its employees. United has termed these threats “illegal” and that it would fight these actions in court.
It is going to take some very creative human resource management to get the human resource issues under control at United Airlines. On top of that, the airline plans is to propose lower wages and benefits as part of the restructuring process to be able to compete in the future.
I believe the biggest issue overall is that the airline has lost the trust of its employees and the employees respect for its business priorities. The employees have been dealt a hard blow; especially the pilots who stand to lose the most. New less-costly pension plans need to be researched, and new agreements will need to be reached in regards to the aircraft mechanics union and flight attendants.
It will be interesting to watch as the events unfold and to see how the human resource issues of this situation are handled. Specifically how the company handles attrition and also how it will attract new employees in the future. If handled adequately, taking into consideration the concerns and interests of the employees, United Airlines might stand a chance to emerge intact from bankruptcy. If the human resource issues are not handled satisfactory, United Airlines could very well be washed up. At this point, United Airlines is basically at the mercy of its employees. If a strike happens with the aircraft mechanics union, the result would most likely shut down United Airlines and force the airlines into liquidation.