JURIST - Paper Chase: Bankruptcy judge allows United to scrap pension plans

[JURIST] A US bankruptcy judge ruled Tuesday that United Airlines [corporate website] may sever its employees' pension plans, precipitating the largest corporate-pension default in US history. The ruling by Judge Eugene Wedoff [official profile] means that United employees will now receive their pensions through Pension Benefit Guaranty Corporation (PBGC) [corporate website] which initially opposed the plan, but later agreed to receive $1.5B in notes and convertible stock in a restructured UAL Corp. [backgrounder], United's holding company. The plan will save United $645M annually, a large chunk of the $2B needed for the company to pull out of Chapter 11 bankruptcy [SEC backgrounder]. Although the employees stand to lose thousands annually in pension benefits, Judge Wedoff said this is a better outcome than the company failing and the employees receiving no benefits. United's competition has expressed concern that the scrapping of its pension may give United a financial advantage over other struggling airlines. AP has more.

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