Airline CEOs Know Something You Don't (And It's Not Just the Airlines!)

Newsweek 10/17 Edition ^ | 10/10/2005 | Allan Sloan

[drt1]

Oct. 17, 2005 issue - One reason flying can be such a drag is that sinking feeling you get when you start talking to your seatmate and discover that she paid much less for her ticket than you did. The trick, of course, is to have access to the best information. What's true for airline fares is also true for airline shares. And for airline pension funds, too, given what happens when an airline goes broke.

Pension-fund information—and the lack of it—links Northwest Airlines chairman Gary Wilson and 9/11 widow Ellen Saracini, whose husband was a United Airlines pilot. Guess what? Wilson benefited by having access to all of Northwest's pension numbers, while Saracini paid a steep price for not having access to United's pension-fund numbers....

[drt1]

"All Northwest would say was that it and Wilson had done nothing illegal, and that Wilson wouldn't talk to me."

That the catch phrase "Nothing illegal" - Just that the insider knows the true finances - Finances that are much worse than what is publicly known, and he is allowed to trade on that information. But it's not 'Illegal' (Snort!)

[BlackRain]

Maybe he meant, "No Controlling Legal Authority".

[2banana]

When the September 11 Victim Compensation Fund settled with Saracini, it subtracted the value of her husband's full United pension from her settlement, as its formula required. But Saracini won't get anything like a full pension because the shortfall in United's pension funds was so much greater than the company had disclosed. This wasn't clear until May, when the PBGC terminated United's pension funds and showed a $9.8 billion shortfall. United had been showing only a $6 billion shortfall.

I can't tell you how much of a haircut Saracini got on her 9/11 settlement—she declined to tell me, and the fund isn't allowed to disclose it. But trust me, it's major money. Had the 9/11 fund known how much the pensions of Saracini and other United employees' survivors would shrink, they would doubtless have gotten larger settlements. "I've lost my husband's pension twice," Saracini told me.

So she will only get 3.5 million instead of 4.2 million? I am sick of these families crying poor when they have received millions in charity and taxpayer monies...

[Wolfie]

There are people who are getting well and truly cranked by pension fund defaults, and they won't be getting millions from any victim compensation funds.

[R.W.Ratikal]

The recent cases where large companies who fail turn over their pension liabilities to taxpayers should be stopped.

Millions of people work for small businesses who offer no pensions. They must depend on Social Security or savings and investments for retirement. Why should they be forced to share their retirement savings with others.

You make a deal with your employer to work and in return you are to be paid, so much now, so much later. If the company goes under, the deal's off. You will receive no more present pay. Why should taxpayers, who had nothing to do with your agreement, now be forced to continue your future pay?

Democrats and other socialist are always whining about restoring "fairness." Here's a good place to start.

[pabianice]

Ask Al Gore. He says he invented the pension system...

[Who dat?]

The recent cases where large companies who fail turn over their pension liabilities to taxpayers should be stopped.

http://www.pbgc.gov/

PBGC is a federal corporation created by the Employee Retirement Income Security Act of 1974. It currently protects the pensions of 44.4 million American workers and retirees in 31,200 private single-employer and multiemployer defined benefit pension plans. PBGC receives no funds from general tax revenues. Operations are financed by insurance premiums set by Congress and paid by sponsors of defined benefit plans, investment income, assets from pension plans trusteed by PBGC, and recoveries from the companies formerly responsible for the plans.

Time people quit crybabying about the pension plans going to the PBGC. That’s what it’s there for.

Not that it really should be. Their pensions, at absolute most, should be frozen for some period of time so they can decide who gets how much and then issue lump sum checks and close it out. Not some make-work program where someone gets to spend a career continuing to manage it.

[drt1]

"So she will only get 3.5 million instead of 4.2 million? I am sick of these families crying poor when they have received millions in charity and taxpayer monies..."

Agree wholeheartedly but that doesn't change the fact that investors and pensioners are given one set of numbers while Insiders have the true story - And the insiders derive benefit from this information at the expense of everyone else. That is the point of this article.

[Wolfie]

PBGC is underfunded by half at this point. It might not be funded by general tax funds now, but the coming bailout definitely will be.

[MarkL]

There are people who are getting well and truly cranked by pension fund defaults, and they won't be getting millions from any victim compensation funds.

I'm trying to remember the exact numbers I read once, but IIRC, in order to get a percentage of the pension promised employees (from the government "bail out"), they have to work until 65, otherwise they forfeit all pension payments. However, I belive that airline pilots are required to retire at 60 by the FAA, and as such, they completely lose their pension benefits, once the government takes over.

Mark