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Tuesday, May 10, 2005 11:37 PM

The Beginning of the End of Pension Plans

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Judge OKs Termination of United Pension Plans, Clearing Way for Largest U.S. Pension Default

United's pensions are underfunded by an estimated $9.8 billion, of which the PBGC would guarantee only about $5 billion. The previous largest U.S. pension default was Bethlehem Steel's $3.6 billion in underfunding in 2002.

United's biggest competitors would be under the most pressure to follow suit. American Airlines, the largest U.S. carrier and a unit of AMR Corp., has said it will keep its pension plans but is concerned about No. 2 United gaining a financial advantage with the elimination of its pensions.

No. 3 Delta Air Lines Inc., which has said it is in danger of being forced to file for Chapter 11 bankruptcy, faces $3.1 billion in pension payments over the next three years.

Is this unexpected?
Not really but look ahead.
Notice that the title is "The Beginning of the End of Pension Plans".
United is currently at bat.
On deck are American Airlines, Delta, GM, and Ford.
The order is not certain and there will be more.
If that gives you the idea that not a single pension plan is safe then indeed you have the right idea.

Every company with a hugely underfunded pension plan that is currently struggling to make ends meet is likely to follow United Airlines into bankruptcy.

Taxpayers will be forced to pick up some of the tab.
Is this inflationary?

Mike Shedlock / Mish

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