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September 27, 2004
Bankruptcy Judge Rules Against United on Pension Info.
A federal bankruptcy judge ruled against United Airlines on Friday in
a procedural dispute, siding with unions who said the company submitted
unsubstantiated claims about how employees would be affected if their
pension programs were terminated, the Associated Press reported. While
it won’t halt United’s controversial bid to cut its pension
obligations, the ruling suggests that parent company UAL Corp. may have
a difficult time winning court approval to eliminate the programs.
Judge Eugene Wedoff granted an emergency motion filed by
United’s machinists and flight attendants, striking late
Thursday’s 91-page filing from the record.
In the filing, United said its pension plans are in far better
financial condition than previously estimated and that the impact of
terminating them would be less than initially feared. It said its four
pension plans are underfunded by $2.7 billion, as opposed to the $8.3
billion estimated by the pension agency, the newswire reported.
Air Canada to Buy Bombardier Jets
Air Canada has agreed to buy $821 million of Canadair Regional Jets
from Bombardier Inc., the companies said today, Reuters reported. The
Montreal-based airline, set to emerge from bankruptcy protection on
Thursday, said it agreed to order 15 of Bombardier’s 70-seat
CRJ700 series jets and 15 of its 50-seat CRJ200. Another 15 conditional
orders of the 50-seaters may be canceled without penalty. The purchase
agreement includes options for 45 more aircraft. Bombardier said the
contract, including firm and conditional orders and options, could total
$2.45 billion, the newswire reported.
US Airways
US Airways Outlines Time Frame for Possible Liquidation
US Airways faces a “high probability” of liquidation by
mid-February if the temporary pay cuts it requested are not approved by
the U.S. Bankruptcy Court, the Washington Post reported. It
was the first time since the Arlington, Va.-based airline filed for
chapter 11 bankruptcy protection on Sept. 12 that it publicly gave a
time frame for a possible liquidation. This possibility was raised in a
filing on Friday. The airline also sought across-the-board pay cuts of
23 percent from its employees, equaling about $38 million a month.
Without the cuts, the carrier told the court, the airline predicted
“massive layoffs” and “potential
liquidation.”
US Airways Reaches New Contract with Trainers
US Airways said yesterday that it reached a tentative cost-cutting
agreement with its 65 flight crew training instructors who make up part
of the airline’s Transport Workers Union Local 547, the
Washington Post reported. The agreement, details of which
were not released, is subject to ratification by the group’s
members and must be approved by the bankruptcy court. The agreement is
only the second such accord between the airline and its labor groups.
Last week the airline reached a $4.5 million cost-cutting agreement with
its 150 flight dispatchers, who also are part of the Transport Workers
Union, the newspaper reported.
Research Confirms Credit Reporting Accuracy
The Federal Reserve Board’s division of Research and Statistics
issued its latest study on Friday that concludes that TransUnion and
other credit reporting agencies operate in an effective manner for the
benefit of consumers, the organization announced in a press release. The
study, entitled “Credit Report Accuracy and Access to
Credit,” found that “evidence indicates that the information
that credit-reporting agencies maintain on the credit-related
experiences of consumers… have substantially improved the overall
quality of credit decisions while reducing the costs of such
decision-making…. If not for the information that the agencies
maintain, consumers on the whole would receive less credit at higher
prices.” View the report at
href='http://www.federalreserve.gov/pubs/bulletin/2004/summer04_credit.pdf'>www.federalreserve.gov/pubs/bulletin/2004/summer04_credit.pdf.
Clouds on the Horizon for Low-cost Airlines
As larger U.S. airlines suffer growing losses, low-cost carriers,
previously thought to be invincible, are not far behind, industry
experts say, due to soaring jet fuel prices, low air fares and more
competition, Reuters reported. The U.S. airline industry has lost more
than $30 billion since the Sept. 11, 2001 attacks on New York and
Washington, as fear of flying and a weak economy have slowed demand for
travel. The industry is expected to lose another $3 billion this year,
according to the Airline Pilots Association.
But even though low-cost carriers are believed to be immune to the
losses, AirTran Airways, ATA Airlines, Frontier Airways and FLYi
(previously Atlantic Coast Airlines), are all expected to post losses in
the next quarter as the airline industry’s turmoil starts
affecting the high-flying upstarts, the newswire reported.
EU Court to Revisit WorldCom’s Deal-making Days
A European Union court is set to rule this week on a $120 billion
deal MCI-WorldCom made during the height of the go-go years, Reuters
reported. WorldCom, since then bankrupted and reborn as MCI, has
challenged the EU’s decision in 2000 to block its acquisition of
rival long-distance carrier Sprint, which was also rejected by the U.S.
Justice Department. The deal was abandoned soon after but the company is
seeking to rid itself of a bad precedent that could dog it for years
before the European Commission should it attempt future
acquisitions.
The decision on Tuesday by the Court of First Instance in Luxembourg
comes four years later—after the end of the boom years, and after
WorldCom’s former CEO, Bernie Ebbers, has been indicted for fraud,
the newswire reported.
Pension Scandal Pushes San Diego Toward Bankruptcy
The Securities and Exchange and Commission and the Justice Department
are investigating whether the city of San Diego hid bad news about its
pension plan, the Associated Press reported. Despite the concerns of
citizens that the city’s pension plan fund was in trouble, top
city officials insisted the fund was fine. Now, however, a pension fund
scandal threatens to send the city into bankruptcy.
San Diego would need to double its pension contribution next year to
$259 million, or about one-tenth of its annual budget, just to avoid
falling further behind, said April Boling who heads Mayor Dick
Murphy’s Pension Reform Committee. That is more than three times
what the city spends on parks and seven times what it gives libraries.
Boling, said the city will need to borrow $600 million on the bond
market over three years and raise the retirement age from 55 to 62,
among other things. “If the city doesn’t follow our
recommendations, we will be headed toward bankruptcy,” Boling
said, the newswire reported.