United Airlines Inc.'s termination of its underfunded pension plans would likely enable it to emerge from Chapter 11 bankruptcy protection but would put other air carriers with legacy pension costs - such as Delta Air Lines Inc. - at a serious competitive disadvantage, according to a report by Gimme Credit, a corporate bond research firm for institutional investors.
"Even if Delta is able to cut a deal with its pilots and creditors to stave off a near-term (bankruptcy) filing, its long-term survival may not be guaranteed in the face of industry overcapacity, continuing high oil prices and competition from other airlines that don't have burdensome pension liabilities," the report said.
Jake Brace, executive vice president and CFO of UAL Corp., Elk Grove Village, Ill., said last Friday after a U.S. Bankruptcy Court hearing that company officials are likely to terminate United's pension plans, although they won't decide before November.
