Judy Valente reports from Chicago.
JUDY VALENTE: John Podlesny and his wife Rose enjoy reminiscing about his 40 years at United Airlines, where he helped keep track of aircraft parts.
ROSE PODLESNY (To John Podlesny) (Looking at Photo): Look at the hair you had.
VALENTE: John loved the airline so much, co-workers dubbed him "Mr. United." When the company told employees recently it can no longer afford to pay their pensions, "Mr. United" tried to remain positive.JOHN PODLESNY (Retired United Employee): While I worked there, they didn't cheat me on my 40 hours of pay. After I left, I had no control. So that's when you become most vulnerable.
VALENTE: The couple also learned that United will no longer pay its retirees' death benefits.
Ms. PODLESNY: He laughs -- he can't die; they took away his life insurance. These are the things that ... you count on and you rely on that you're going to have, and it was taken from us. Is it fair? No. Is it right? No. I mean, these were things that were promised to us.VALENTE: United, which is trying to emerge from chapter 11 bankruptcy, received permission in May from a bankruptcy judge to opt out of its defined benefit pension plans. Such plans provide a specified income. A federal pension agency is supposed to protect these pension rights, but it does not guarantee full payment. Like many companies, United took advantage of loopholes in the law to underfund its pension funds, especially during the economic downturn following 9/11. United officials declined to be interviewed, but the airline's chief executive, Glenn Tilton, has said it was either eliminate defined pensions or go under.
Dr. AARON GELLMAN (Northwestern University Transportation Center): It's a question of the greater good. I mean, the employees were saved from losing jobs, I believe, by this step. I believe that United probably would not have been able to recover, that is, come out of chapter 11. It's the lesser of the evils, let's put it that way.VALENTE: But for others, United's move raises ethical questions. Is it fair for a corporation, even one in financial trouble, to renege on a long-standing, contractual promise made to employees?
Dr. SCOTT PAETH (Professor of Religious Studies, DePaul University): The key ethical issue that the pension action raises, from my perspective, has to do with the question of whether or not there are any obligations that exist between employers and employees anymore, or whether utilitarian considerations of what a corporation considers to be in its best interest are the only things that matter.VALENTE: United employees have already agreed to give up about $3 billion in wage concessions a year for the next five years. That's why many employees thought their pensions were safe.
CATHY SAMPSON (International Association of Machinists): We feel cheated by this. We feel these were promises that were made to us. They were deferred wages. We earned it, we deserve it. We always thought it was going to be there, and now when we need it the most, we find out none of this is true, that we're not going to get this.VALENTE: Sampson expects to see a 30 percent reduction in her pension, from an estimated $2,500 a month to about $1,700. Some employees stand to lose a greater percentage.
SARA NELSON DELA CRUZ (Association of Flight Attendants): We will go from a livable wage to not being able to live in our retirement. We will have to work forever.
Dr. PAETH: What could happen is a taxpayer buyout, which would result in the entire country having to bear the brunt of United's decision and the decisions of other corporations that might follow suit.
KEN BRADLEY (Retired United Pilot): I was required by federal law to retire at age 60. Another federal law made me ineligible for Social Security for some period of time, for a minimum of two years after that. And should the pensions be terminated, there is a further concern, agewise, because the Pension Benefit Guaranty Corporation, which would take over these plans, imposes very strict penalties if you are less than 65 years old when you retire. We may, in fact probably will, have to sell our home and try to start over. And you can't start over as a pilot after the federal government shuts you down at age 60.
Dr. GELLMAN: In other industries that are tempted to do this, we ought to hold their feet to the fire and make sure that it's a reason and not an excuse.
Ms. NELSON DELA CRUZ: Even throughout all of these sacrifices, employees have remained faithful to our customers and to our jobs, to our careers, to our airline. And we would encourage people to continue to fly United Airlines and support us.
