UAL Corp., Chicago, today announced that it will delay making $563 million in contributions to its United Airlines pension fund scheduled for this year until it emerges from bankruptcy. The deferment is part of a restructuring of its credit facilities with its lenders. UAL contributed $127 million to its pension fund in the first quarter and was due to make a $72 million payment on July 15, said Jean Medina, a company spokeswoman.
Ms. Medina said the airline could not predict when it will emerge from bankruptcy. "We need to make sure we have the liquidity and flexibility that not making these payments provides us," she said.
Randy Clerihue, a PBGC spokesman, said UAL's action results in an automatic lien, but "they don't do the PBGC much good when the company is already in bankruptcy."
United's pension plan had $6.96 billion in pension assets and $12.65 billion in pension liabilities as of Dec. 31, according to its 10-K filing.
UAL's announcement does not bode well for the future of United's pension fund, Mr. Clerihue said. "In our experience, it's rare for bankrupt companies that start skipping legally required contributions to start making up the shortfall. It more often ends in termination than in the plan riding through and getting funded up again," he said.
