United Airlines could terminate its pension plans as soon as January and replace them with a defined contribution plan, said Jake Brace, executive vice president and CFO of parent UAL Corp. The company expects to present a plan in November to its unions and other stakeholders on ending its pension plans, Mr. Brace said today after a hearing on UAL's Chapter 11 proceedings in U.S. Bankruptcy Court in Chicago.
He said airline officials don't see any alternatives to termination.
United would save $4.5 billion over the next five years by terminating the plans, he said. United owes $563 million in pension contributions for the rest of this year and faces $4 billion in pension obligations through 2008. United plans have $12.65 billion in accumulated pension liabilities as of Dec. 31, according to UAL's 10-K filing.
"United's pension liability is currently the most significant issue in this case," James H.M. Sprayregen, attorney at Kirkland & Ellis, which represents UAL, told the judge.