CHICAGO — The days appear to be numbered for United Airlines' pension plans.
Putting off its pension obligations due this year in order to meet the requirements of new debtor-in-possession financing, the unit of Chicago-based UAL Corp. is staring down the barrel of two union lawsuits and pressure from creditors and the Pension Benefit Guaranty Corp.
The bottom line: The company doesn't have the money to pay its pension obligations, nor is it likely to any time soon.
"They can't pay what they've got to pay," said Mike Boyd, president, The Boyd Group, Evergreen, Colo., an aviation consulting firm.
United owes $563 million in pension contributions for the rest of this year but just received a commitment for $500 million in debtor-in-possession financing contingent on the airline not making contributions to the plan, he noted.
A U.S. Bankruptcy Court judge in Chicago will consider approving the new funding at a hearing Aug. 20.
The company is facing $4 billion in pension obligations through 2008. The plans, with $6.96 billion in total assets, are underfunded by $6.1 billion, said United spokeswoman Jean Medina.
"At some point, something will have to snap, and it will have to be the pensions," Mr. Boyd said.
Speaking of a possible pension plan termination, Frank Cummings, of counsel with LeBoeuf Lamb Greene & MacRae LLP, Washington, which represents United's retired pilots, said: "If you read the tea leaves, I believe (United) probably thinks they are going to do it, (but) tea leaves don't make it happen."
The company would have to "jump through a lot of governmental hoops" to terminate the plans, he said.
Ms. Medina said UAL officials have been talking to PBGC officials since the airline filed for protection from creditors in December 2002, and there is still a great deal to study.