Actual financial losses, possible pension cuts force employees, retirees to adjust their plans

Author: David Armstrong
Source: San Francisco Chronicle

It's been a rough ride for workers at United Airlines over the last five years.

Nearly 40,000 United workers -- including 9,000 in the Bay Area -- retired, quit or were laid off as the troubled airline slashed its workforce.

Employees who once owned big chunks of the airline's parent company, UAL Corp., through an employee stock ownership plan lost their stock when the company went into Chapter 11 bankruptcy reorganization in 2002.

Moreover, they have conceded $2.5 billion a year in wages and benefits to United, which says it needs even more stringent cost-containment to emerge from bankruptcy.

Now their pensions, which veteran workers long viewed as a golden key to a comfortable retirement, are threatened. United wants to dump all its pension plans.

If a Chicago Bankruptcy Court agrees after it considers the matter Tuesday, the Pension Benefit Guaranty Benefit Corp. -- itself running a deficit -- will assume responsibility for the pensions. The agency plans to pay about 75 cents on the dollar.

There will be more action in the courtroom Wednesday, when United will ask for permission to nullify its union contracts.

All this is in sharp contrast to just five years ago, when United was flying high.

United, based in Chicago, then employed 100,000 people worldwide, including 20,000 in the Bay Area: mechanics, machinists, flight attendants, pilots, reservations agents, baggage handlers and others.

United, once the world's largest airline, dominated San Francisco International Airport, Northern California's busiest air gateway and one of United's five global hubs.

Today, after downsizing, United has just 62,000 workers, including 11,000 in the Bay Area, just over half as many as in 2000. The carrier still dominates SFO, with half of all passengers and flights, but it has slipped behind American Airlines to No. 2 in the world.

Most importantly, United has lost $9.6 billion since 2000 and continues to bleed money.

Against this background of turbulence, United's current and former workers are struggling to adjust to unexpected changes in their lives, driven by the company's continuing demands for more givebacks.

Here are the stories of four Bay Area people, three of whom have retired from United and one still working for the airline, and how they are faring. .

Bob and Carole Berninghausen

They're taking dream vacations now, while they still have the means to travel. They're thinking of selling one of their two vehicles, to reduce their car insurance payments, and they won't be buying a new car anytime soon. They're worried about cuts in their pensions, lower Social Security payments and shrinking medical coverage.

The Berninghausens, who have been married for 32 years, are retired from their jobs at United. They own their pretty home on a Belmont hillside canopied with trees. Off in the distance is SFO, where Bob, 68, worked for 35 years as a lead mechanic, and Carole, 61, worked for 12 1/2 years in the storage supply area. They miss United and the lifetime security it represented.

"When I went to work with them, it was like family," Bob said. "United was the place to go. People would say, 'Oh, you're working for United.' I would say, 'Yeah!' I was proud."

"You had competitive benefits," Carole said. "You had travel benefits. United felt like the heartbeat of the world."

The couple participated in United's employee stock ownership plan, their holdings reaching a peak value of about $250,000. Life was good.

Then, just as Bob decided to retire, things took a turn for the worse for the couple.

His last day at work in United's sprawling SFO maintenance center was on Halloween 2001. "There was a retirement party for me in my shop," Bob said. "During the party, I got a call from my doctor, who said, 'Bob, you have prostate cancer.' "

He underwent successful cancer treatment and feels fine now, but the experience focused the Berninghausens' attention on medical care and coverage. As United cut back on benefits and their medical co-payments rose, they found themselves paying more medical expenses directly, which squeezed their finances. "We have really tightened the belt," Bob said.

The couple have been drawing about $40,000 a year from their United pensions. That sum will shrink if the Bankruptcy Court judge approves the hand- off of United's pension obligations to the Pension Benefit Guaranty Corp., which cannot fully fund them.

Beyond United's travails, the couple is worried about President Bush's plan to revamp Social Security and reduce future benefits. "The huge concern is Social Security," Carole said.

"You know in the back of your mind you have Social Security, you have your pension," she said. "You expect to have not a lavish but certainly a comfortable retirement. We have played by the rules, all of the rules."

"It's just the insecurity," Bob said. "We're OK today, but are we going to be OK tomorrow? Just how far can you go?".

Terry O'Rourke

Terry O'Rourke sits on his houseboat at Oyster Point in South San Francisco and wonders where the tides of law and commerce will take him.

A 51-year-old electronics technician for United Airlines, O'Rourke had planned to retire at 55, sit back and watch the world float by. Now, with his employer in turmoil and his pension in the hands of a Bankruptcy Court judge, O'Rourke thinks he'll have to work as long as he possibly can.

When he's not working at United's maintenance center, O'Rourke attends Bankruptcy Court hearings in Chicago. He doubles as a reporter and assistant editor for Waypoints, a newsletter published by the Aircraft Mechanics Fraternal Association.

His union activism informs his outlook. O'Rourke thinks the Bankruptcy Court's rulings have consistently favored the company at the expense of United's employees and retirees.

"There's something very wrong with a system that doesn't rank employees' pay and benefits ahead of other creditors," he said, adding that the expected reconfiguration of pension plans will give him several hundred dollars a month less than he had expected.

O'Rourke's personal finances are not where he'd like them to be or where he had expected them to be after 19 years at United. His medical coverage has been cut back and his co-payments have increased, and that is important to O'Rourke, a diabetic who uses insulin daily.

Like other United workers who sank money into the employee ownership stock plan, O'Rourke lost virtually everything when the it ended before United's journey into Chapter 11. "I put $70,000 into the (plan)," he said. "I got about $1,500 out of it."

O'Rourke, who is divorced, lives alone on his boat and helps pay for his daughter's college education, all the while dealing with his medical bills. Those bills got bigger several years ago after he was involved in a serious traffic accident near his home.

"The accident cost me $13,000," he said. "It was $1,300 for the ambulance to get me down to Stanford Medical Center."

Indeed, recent years have brought big shocks to O'Rourke, whose father went to work for United in 1946. "There are a lot of second-generation people like me who worked for United," he said. "It had that tradition."

Now, though, as the company struggles, the culture at United is being turned upside-down, he said. The era of mutual loyalty between employer and employee and with it a tradition of decades of employment at United are quickly becoming history.

"People are leaving the company in mid-career, like they never have done before. They are losing a lot of bright people," he said..

Richard Lesnick

In September 2002, mechanic Richard Lesnick retired after 16 years at United. Now he is working nearly as much as he ever did.

Facing up to a 25 percent cut in his pension, Lesnick, at 58, has gone back to work. "I had a nice retirement for about one and a half years," he said. Then financial reality hit home. "The difference now is I'm not retired. I'm just not working for United Airlines any more -- thank God."

Lesnick, who shares a home in San Francisco's Sunset District with his wife, a retired teacher, works three days a week at a bicycle shop in Walnut Creek. He also has a home business making bicycle wheels.

It's very different from life at United, where Lesnick worked on aircraft switches in the components shop. These days, he bikes to the Embarcadero BART station, rides BART to Lafayette, then bikes to Walnut Creek.

"I'm outside on my bike all the time," he said.

Lesnick is enjoying the change in lifestyle, but he stresses it was prompted by the need to shore up finances.

"I had an $80,000 nest egg in the employee stock ownership plan," he said. "When it started, it sold for $73 a share. When I retired, my stock was worth 92 cents a share. I got out with about $1,100, which I then had to pay taxes on. I netted $650."

Then, "After United went into bankruptcy, my premium for medical insurance went up 500 percent, and the coverage was slashed," he said. Lesnick, who was seeing an osteopath for a neck injury, felt the financial pain immediately.

Now his pension income will most likely go down.

"I'm getting just under $1,200 a month from my United pension," he said. If the Pension Benefits Guaranty Corp. takes over United's plans, his pension will drop to about $900 a month. After taxes, he'll clear about $750 a month.

His wife's pension from teaching is more than twice as high as his. With her pension and his part-time work, the couple are doing all right.

However, Lesnick is concerned about current and former United workers who are facing personal crises because of the company's losses and its bid to shed pensions and rewrite labor contracts.

"They were given promises in writing, and those promises have been broken, " he said.