July 2005: Pension Crisis Looms: Why United Airlines Crisis matters

Since September 11, there has been a wide range of articles about the crisis that has confronted the airline industry. Anyone who has travelled by air knows that the world has changed big time for travellers. Airlines seem to be losing money on each ticket but trying to make it up in volume....something that any business owner could tell them is bad business...but they persist.

A week ago, the PBGC (Pension Benefit Guaranty Corporation), a federal agency that insures the pension benefits of companies, took over the pension liabilities of United Airlines 123000 employees and retirees in the U.S. The problem is that this agency is 23 billion in the red at the current time and in poor shape to handle all the potential claims of the 20% of Americans that have defined benefit pension plans, plans that corporations have an incentive to avoid through the bankruptcy process since they are usually the ones that are underfunded.

You may have thought this was just a problem at United Airlines. Wrong. It is a problem for every American who has a pension. The article titled "Pension Fury" or "Pension Roulette" by Tim Grey in the AARP Bulletin this month is a good article that explains what this crisis could mean for you. Click on the post title to access the article.(www.aarp.org/bulletin)

The question I have is "Has deregulation really worked?" The regulated system for airlines had capital requirements for maintainance, pensions etc., but with the free for all market place, the public is not guaranteed that the essentials are covered. How about energy? or telephone? Are you any better off haveing 10,000 providers for long distance calling you for quotes on your long distance? How about the stock market? Now we have a totally transaction system where the system is designed to exploit not serve.

So, is this a a pension crisis at United or is it more---- a deep crisis of deregulation of industries that are in the public interest and should have SOME minimium level of regulation, and more than at present. What is your call?