The Pension Benefit Guaranty Corporation (PBGC) has taken over the pensions of nearly 4,000 employees and retirees in three pension plans of Aloha Airlines Inc., making it the latest airline to ditch its defined-benefit plans as part of a bankruptcy reorganization. The agency said it expects to be responsible for $117 million of the $155 million shortfall.
The three pension plans covered are the Pilots’ Fixed Retirement Plan, the Pension Plan for Non-Represented Employees, and the Pension Plan for Employees Represented by the International Association of Machinists. The airline will maintain responsibility for a fourth plan, for dispatchers, the PBGC said.
Aloha Airlines recently emerged from bankruptcy reorganization. It had filed for bankruptcy protection on December 30, 2004, and notified employees on October 14, 2005, that it would seek bankruptcy court approval to terminate its pension plans. On February 2, 2006, the court approved a settlement between Aloha and the PBGC providing for termination of the three plans.
The PBGC said that assumption of the plans will have no material effect on its balance sheet since an estimate of the liability was included in its fiscal 2005 financial statements.
The Associated Press pointed out that the PBGC’s most recently reported deficit was $22.8 billion. Airlines and steel companies have accounted for much of this shortfall.