September 15, 2004
Retail Sales Down in August
Retail sales dropped 0.3 percent in August, while the United
States’ trade deficit rose to another record high of $166.2
billion in the second quarter of this year, according to two economic
reports released yesterday, CongressDaily reported. The
Commerce Department reported that retail sales numbers continued an
erratic path, with August’s 0.3 percent drop following an 0.8
percent increase in July but a 0.7 percent drop in June. Most of
August’s decline was in auto sales, which offset a 0.2 percent
increase in other sales. The department also reported the trade
deficit’s growth from $147.2 billion in this year’s first
quarter.
With an Eye on Airlines, Lawmakers Ponder Pension Changes
Looming airline bankruptcies are stirring concern among lawmakers,
but architects of pension legislation say the main response to the
problem will come in the form of broader pension legislation next year,
CongressDaily reported. Lawmakers are circulating a
House-Senate letter to bankrupt US Airways, warning it not to terminate
its pension plans, a move that analysts say could trigger similar moves
by other airlines. US Airways said on Tuesday said it might scrap its
pension plans in an effort to shed huge liabilities. If other airlines
do the same, the Pension Benefit Guarantee Corp. (PBGC) would have to
take over the plans. The PBGC already is running an $11.2 billion
deficit.
But House Education and the Workforce Chairman John Boehner (R-Ohio)
yesterday said Congress would not have time to respond legislatively in
the waning days of the congressional session. Boehner told the U.S.
Chamber of Commerce, though, that lawmakers are keeping a wary eye on
the airlines. “I’m concerned about the possibility of a
company using the PBGC as a pension dumping ground to boost their
economic prospects and get a leg up on competition,” he said.
Senate Finance Chairman Charles Grassley (R-I0wa) agreed that lawmakers
would not single out troubled airline pensions. “We’ll
address that in the confines of what I call the NESTEG bill,”
Grassley said, referring to a bill he introduced last year that would
change the formula companies use to calculate pension contributions.
Boehner said he is on track to finish drafting legislation by fall to
overhaul the rules governing all defined-benefit pension plans, with
committee action slated for early next year.
US Airways, United Worker Pensions Get U.S. Support
Workers from US Airways Group Inc. and UAL Corp.’s United
Airlines will be protected in the event the companies’ terminate
their pension plans in bankruptcy court, the government agency that
insures company retirement plans said, Bloomberg News reported. US
Airways and United have both said they may seek to end pensions for some
or all employees. US Airways will miss a $110 million contribution to
pension funds tomorrow in the carrier’s second reorganization in
two years. United plans to skip about $575 million in contributions to
help it out of bankruptcy. Pension Benefit Guarantee Corp., which
backstops the pensions of 44 million U.S. workers and retires, said it
would ask Congress for reforms to help ensure that companies meet
pension obligations, including changes in bankruptcy laws that would let
workers’ pension claims trump unsecured creditors. “We need
to make clear that pension contributions are required whether a company
is in bankruptcy or not,” said PBGC Executive Director Bradley D.
Belt in a statement.
Morgan Lewis Reaches Brobeck Settlement
Morgan, Lewis & Bockius has agreed to pay $10.2 million to the
estate of Brobeck, Phleger & Harrison to avoid litigation with
Brobeck’s bankruptcy trustee, the Recorder reported.
The issues raised by the trustee “were far from clear,” said
Morgan Lewis Chairman Francis Milone. But, he added, “We
don’t want to get involved in protracted litigation that would be
expensive for us.” Former Brobeck partners are contesting a
similar arrangement reached earlier with Clifford Chance. Read the
article at
href='http://www.law.com/jsp/article.jsp?id=1095207104599'>http://www.law.com/jsp/article.jsp?id=1095207104599.
Costs Must Be Reduced Soon, US Airways Says
The head of US Airways Group Inc. set a timetable yesterday for
reducing the airline’s costs, telling two Republican senators that
failure to do so by January could imperil the carrier’s chances of
emerging from chapter 11 protection, the Washington Post
reported. US Airways CEO Bruce R. Lakefield outlined the airline’s
restructuring plans yesterday in the 40-minute meeting with Sens. Rick
Santorum (R-Pa.) and Arlen Specter (R-Pa.), where the air carrier has
two major hubs. During the meeting, according to the senators, Lakefield
said that unless it reaches an agreement with its workers, the
Arlington, Va.-based carrier will attempt to modify its labor agreements
through the bankruptcy court by submitting proposed contracts to take
the place of agreements that are in place.
Delta Pilots Direct Negotiators to Work out Interim Agreement
Delta Air Lines’ pilots union directed its negotiators to work
out an interim agreement with the airline, aimed at stemming an exodus
of senior pilots that threatens to push the company into a
bankruptcy-court filing, the Washington Post reported. The
Air Line Pilots Association leadership committee ended a special two-day
meeting in Herndon, Va., passing a resolution that would allow
exceptions to the pilots’ collective-bargaining agreement,
including letting Delta bring back some retired pilots as private
contractors “for a limited time,” according to a message the
union sent to its members. The union said any interim deal on pilot
retirements would have to be ratified by the leadership committee and by
members.
Bankruptcy Court Official Seeks Probe of AmeriDebt
The transfer of AmeriDebt’s assets to a for-profit affiliate
started by the Montgomery County credit counseling agency’s former
chief executive should be investigated as potentially fraudulent,
according to a bankruptcy court examiner looking into AmeriDebt’s
finances, the Associated Press reported. The examiner, appointed by the
U.S. Bankruptcy Court in Greenbelt, also noted in a report filed this
past weekend that the Internal Revenue Service has filed a claim against
AmeriDebt for more than $15 million, in anticipation that its nonprofit
status might be revoked.