11 October 2005

Funding The Underfunded

This week the company announced that they contributed $84 million to our defined-benefit pension plans, thereby meeting our minimum requirements for funding under federal law.. While it's welcome news, our pensions are still underfunded. The last I heard our pensions are underfunded by approximately 10% of their current value. Definately better than Delta's and Northwest's position of having to contribute close to $8 billion by next year, unless current legislation in congress is enacted allowing airlines to defer their current contributions over 14 years. I still have a nagging suspision that the latest two entrants into bankruptcy protection will eventually seek to dump their pension obligation on the federal government. If they do, I strongly suspect that both American and Continental will follow into bankruptcy to do the same.

I was talking with a gate agent the other day, and there is still a lot of rancor and bitterness concering the wage concession they were forced to take. There was a lot of talk about how upper management views the field services divison as a "cost center." The agent didn't seem to understand that, with the prevailing idea is that field services doesn't spend money. That the only time field services "cost" money is when agents damage an aircraft. I think their is some misinformation about what a cost center is. That is field services doesn't generate revenue. Field services is considered a cost center because the company has to pay those employees, without those employees generating revenue for the company. I find it ironic, especially when agents collect excess and overweight baggages fees, collect revenue from tickets purchased at the counter, and collect monies from change fees. While it may not equal the revenue generated by reservations, cargo, and continental.com, it is still revenue, not to mention the fees that employees have to pay to travel on stand-by.

The agent also went on to complain how local management does nothing but complain and criticizes agents for doing their job with the constraints placed upon them. The agent's perspective is that downtown yells at the airport director, who inturn yells at the assitant directors, who inturn yells at supervisors, who finally take it out on the agents. I tend to agree as I've seen it happen myself.

We're also looking at increased competition from jetBlue, who plans to add 52 additional flights from it's JFK hub to Boston, MA, Austin, TX, and Richmond, VA. jetBlue is our biggest low cost carrier competition in the new york area. It will be interesting to see how we handle the competition and think of ways to compete, or else if we will fall further into the "the fuel prices are too high & they off fares to cheap" mantra that seems to plague the majors.

One thing we are doing is adding new inflight entertainment on our Boeing 757-200 aircraft. The new IFE will feature audio and video on demand with touchscreen controls. Since the new AVOD equipment is smaller, we will be adding three more coach class seats where the old IFE equipment use to be.

4 Comments:

Anonymous SMF said...

I am NOT an employee..but would like you to know that corp. value their pension assets by a method that is not the same as how the gov. pension agency would value same! MORE LIBERALly valued!!
Consult Value Line page For 'CAL'
to see how much they say pension is underfunded !

02 November, 2005 15:27  
Anonymous Anonymous said...

I am not a CO employee either but I am glad that my retirement is not in pension form at my company. At least my 401K, I have somesort of a fighting chance to retire before I die. Oh go, I am screwed either way aren't I!!!

06 February, 2006 14:05  
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