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Continental isn't funding its pension plan this year

By Lynne Marek
Bloomberg News

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CHICAGO — Continental Airlines, the fifth-largest U.S. carrier, yesterday said it will skip contributions to employee pension plans this year, taking advantage of a law enacted in April to conserve cash.

The move will help the company keep $1.5 billion in unrestricted cash during "these difficult and turbulent times," Houston-based Continental said in a statement. The carrier said in a July filing that it planned to put $250 million in the plans and faced a minimum funding requirement of $17 million.

The U.S. law gave airlines, steelmakers and other companies the option to defer about $80 billion in pension funding during the next two years. Continental spokesman Rahsaan Johnson declined to comment on what the airline will do next year. The company's plans cover almost all of its 41,000 workers, he said.

"We kind of understand the economics of the situation," said Jim Moody, a spokesman for the Continental Air Line Pilots Association. "We wish the economics were better, but that's the airline industry."

Continental is trying to trim expenses by $1.1 billion, after almost completing implementation of earlier measures to cut $900 million.

Moody, the pilots union spokesman, said Continental told the union it was going to skip the pension contributions. The carrier and the pilots are talking about changing the airline's pension plan, which now pays retirees a set amount of benefits, to one that funds individual retirement accounts.

The pilots union said such a program would be cheaper for the company and would give workers more control of their retirement savings. Pilots are the highest-paid workers at airlines and receive the biggest pensions because those benefits are based on pay.

United Airlines, which is operating under Chapter 11 bankruptcy protection, angered its unions last month when it announced it probably will terminate its pension plans and won't contribute to them the rest of this year. Termination would transfer the failed plans to a federal agency, the Pension Benefit Guaranty Corp., which would cover only $6.4 billion of the $8.3 billion benefits.

Copyright © 2004 The Seattle Times Company

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