Continental Airlines Inc., Houston, expects its 2005 pension expense to decrease by about $90 million as a result of freezing the pilots' and flight attendants' defined benefit plans and starting new defined contribution plans, according to the carrier's annual report filed with the SEC. The company previously said it expected $315 million in non-cash pension expense this year.
Continental officials announced Feb. 28 that the airline reached tentative agreements with its pilots, flight attendants, mechanics and dispatchers for new contracts. Under the tentative pact with its pilots, the airline would freeze the pension plan May 31 and start a new money purchase plan. The flight attendants tentatively agreed to become part of the $6.4 billion International Association of Machinists and Aerospace Workers National Pension Fund, Washington. The unions are slated to vote on ratification of their agreements by the end of March.
The airline will be required to contribute $307 million to its pension plans in 2005 and a total of about $1.56 billion through 2009 based "on current legislation and assumptions," according to the report. Those estimates don't take into account the impending pension changes. The company assumes a 9% long-term rate of return on plan assets.
The airline had total defined benefit assets of $1.3 billion as of Dec. 31, according to the report.
Sarah Anthony, Continental spokeswoman, said the airline is declining to comment on information related to the annual report.