…Gigantic Numbers Play Just A Small Part

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Just what role do pensions play in the overall financial health of the major airlines? Although the numbers are huge (airline contributions will total about $10.4 billion over the next four years, assuming they’re made), the actual effect on the bottom line is minimal and only accounts for 15 percent of the cost spread between the budgets and the majors. However, the impact of default on employees, especially pilots, can be enormous, or it may be negligible, depending on time and circumstance. Pilots take a beating on two fronts. When a plan defaults, it’s picked up by the Pension Benefit Guaranty Corporation, but never at the full amount. Instead of dividing the difference equally among retirees and those whose future pensions will be affected, the PBGC weights distribution of the funds in favor of those who have already retired. It also caps the benefits at about $45,000, far less than some senior captains expect on retirement. And since pilots must retire at 60, their benefits are further cut to about $29,000 if they leave the workforce on retirement.

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