WASHINGTON -- Now that United Airlines and US Airways have been granted Bankruptcy Court approval to terminate their pension obligations, competitive pressure is mounting on other struggling carriers to seek relief.
Industry officials and analysts said they don't expect other carriers to file for bankruptcy merely to shed the cost of underfunded pension plans. But they warned that airlines facing severe financial troubles may be more inclined to seek a Chapter 11 reorganization, given the precedent established by US Airways Group Inc. and United's parent company, UAL Corp.
Several airlines that hope to avoid bankruptcy are already lobbying Congress for pension law changes that would allow them to freeze their current obligations outside of Chapter 11, while giving them more time to meet growing shortfalls in funding. Yesterday, flight attendants at American Airlines, a unit of AMR Corp., gathered in Washington to lobby for such reform.
Although passenger traffic is rising, much of the industry is suffering due to soaring fuel prices, cheap fares, and competition from low-cost carriers. Losses have exceeded $30 billion since 2001 and US carriers could lose another $5 billion in 2005, analysts estimate.