UAL Corp.'s decision to stop contributing cash to United Airlines' severely underfunded pension plans might sound the death knell for the carrier's defined benefit plans, according to industry observers.
Less clear, however, is what the knock-on effect would be for the rest of the airline industry.
While some experts think a termination of Chicago-based United Airlines' four pension plans will force other major carriers to shut down their costly plans to remain competitive, others argue that airlines are unlikely to plunge into Chapter 11 bankruptcy proceedings just to terminate their plans.
Rather, some might turn to the model offered by Gerald A. Grinstein, chief executive of Delta Air Lines Inc. In a July 30 letter to the Air Line Pilots Association, Mr. Grinstein implied he will seek to freeze benefit accruals at Delta's plans and to create a new retirement plan to cover future accruals.
"Delta's objective is to maintain the ability to fund the existing plans and provide a secure, sustainable new retirement plan for the future, within the boundaries of viability for Delta," he wrote. Delta spokeswoman Catherine Stengel declined to provide additional details.
In response, the union's leadership lambasted Mr. Grinstein's proposal, which was part of a broader package seeking $1 billion in concessions from the union.
"Management's proposal appears to have only one purpose — to exploit the current situation and attack our profession by destroying our contract," Capt. John J. Malone, chairman of ALPA's leadership committee, said in an Aug. 4 letter to pilots about the $1 billion in concessions. Delta pilots had offered a package worth up to $705 million in wage and benefit cuts in exchange for company stock, profit-sharing and governance changes, in an offer that kept the defined benefit plan intact.