As United eyes pension default, unions threaten strikes

United, the nation's second largest airline, faces a make-or-break set of challenges this week that will determine if it can emerge from bankruptcy.

Key to its success, the company claims, will be jettisoning its pension obligations, a move that could also spark damaging strikes by some of United's unions. They charge that management has failed to look at other alternatives and is simply misusing the bankruptcy court to balance its books on the backs of employees.

The airline's pensions are currently underfunded to the tune of $9.8 billion dollars. If the company succeeds in winning approval this week to turn them over to a government insurer, it will amount to the biggest pension default in US history. And analysts worry that other major carriers, also struggling in this new, low-fare economy, will be quick to follow.

But while the challenges United confronts may seem extraordinary, from threatened strike votes to the uncertainties of a bankruptcy trial that starts Wednesday, the tests that the company is facing reflect what in many ways is a new American economy. From the airlines to department stores, Americans have made it clear that low prices are king. Unions call it the "Wal-Martization of America," while conservatives say it's the market working in the consumers' interest. However the trend is viewed, it's clearly reverberating across the landscape, transforming everything from the US trade deficit to the quality of products that consumers are able to buy.

The low prices Americans demand ultimately end up affecting the salaries they're able to earn. And nowhere is that more evident than in the airline industry. This once-glamorous haven for skilled, high-paid employees, from pilots to mechanics, is now facing an entirely new set of economic imperatives that requires them to accept lower wages and fewer benefits, or risk driving their companies under.

It's not a choice that makes anyone happy. And with unions now threatening strikes at United, the question is which path the employees will ultimately take.

"Whether it's GM or Ford or United, the price the consumers are willing to pay won't support current operations, let alone past obligations like pensions, and healthcare and other retiree benefits," says David Stempler of the Air Travelers Association in Washington. "There is either enough money to pay for current operations or past obligations, but not both."

In a filing for a hearing Tuesday on its pension obligations, United defended its proposal to turn its remaining pension plans over to the Pension Benefit Guarantee Corp. as necessary and as a "landmark achievement" in its restructuring. The move would save the ailing airline $4.4 billion over six years, which would make it easier to gain financing to exit bankruptcy.

"It will allow the company to move forward as a sustainable, competitive enterprise for the long term - ultimately United's most important goal," the company said in a statement.

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