United Airlines, the embattled air transport operator, looks set to spark the biggest pension default in US corporate history as it approaches bankruptcy proceedings. And with investors in US Airways and Delta Airlines also eyeing Chapter 11 proceedings, it seems the worst may be yet to come for employees at US airlines. United's pension fund obligations amount to $6.4 billion and would add to the $9.4 billion deficit already assumed by the Pension Benefit Guarantee Organisation (PBGO), the federal agency that insures US corporate pension plans.
The story is symptomatic of increasing pressures on corporates to effectively deal with their widening funding gaps. Up to 81% of US corporate benefit plans are underfunded.
For more on corporate pension issues see CFs October issue on the effects of the EU pensions directive on UK corporates, and look out for CFs November focus on ?Funding the Pension Shortfall.'
Please email your thoughts or comments on the issue of corporate pensions to: ethornton@euromoneyplc.com