Wednesday, June 11, 2008

Details of the United Airlines Flight Attendant 'Early Out' Program

United AirlinesLast week, United Airlines announced plans to retire 100 aircraft, end its low-fare Ted service, and cut over 1,000 jobs. In conjunction with those plans, the airline announced that it will offer "a one-time opportunity for eligible flight attendants to voluntarily separate from the company." Known as the Early Out Program, the voluntary separations will be made available for up to 600 senior United flight attendants.

The United Airlines announcement about the Early Out Program summarizes:

Flight attendants who are at least 45 years old and have at least 15 years of flight attendant service with the company as of August 1, 2008 will be eligible to participate. Participants will be entitled to severance payments based on years of service and retiree travel benefits.
Sounds potentially attractive on the surface, but is this a good deal for senior flight attendants or not? The answer is, "It depends."

Mostly it depends on whether the flight attendant has another source of income to rely on, and access to affordable health insurance coverage.

The present Early Out Program is based on a collective bargaining agreement reached between United Airlines and the Association of Flight Attendants (AFA), the union representing United's flight attendants. The details of the Early Out Program have been made available on the public section of the website of the United Master Executive Council (MEC) of AFA:
  • Eligibility
    • Flight attendants aged 45 or greater, and with at least 15 years service are eligible for the Early Out.

    • Flight attendants aged 55 or greater, and with at least 15 years service are eligible for retirement, plus the Early Out.

  • Early Out Severance Pay will consist of $500 for each year of service as a Flight Attendant up to 25 years ($12,500 cap). Total pay is distributed in 12 equal installments beginning January 2009.
    • Example: 18 years of Flight Attendant service equals $9000. This would be paid out at $750 per month, before taxes, for 12 months.

  • Travel Benefits - retiree travel pass benefits provided for all Early Out participants.

  • Life Insurance will be provided only for those who enter retirement at the time of the Early Out.

  • Medical Insurance will be provided for those Early Out participants who also retire, but not to those who are too young to do so. The latter will be able "to purchase COBRA for continued medical coverage for 18 months at the full cost of the insurance and administration."
United Airlines flight attendants who meet the age and length of service criteria for the Early Out Program would have been employed by the airline prior to and during the carrier's recent bankruptcy period. That means that they had their company pension plans terminated in 2005. At that time, United Airlines defaulted on its pension obligations, and the Pension Benefit Guaranty Corporation (PBGC) took over pensions for workers at the airline, including the flight attendants.

Federal regulations limit the amount of pension payments the PBGC can make -- an amount far less than the original pensions -- and by law, that amount is further reduced if the worker retires early, i.e., before age 65. As a result, many flight attendants at United have since felt that they had no practical choice but to continue working until their 65th birthdays. To do otherwise would put them in serious financial straits.

In light of that situation, it seems that the current Early Out Program will be attractive mostly to those who already have a substantial second income, or whose spouses' or partners' income and health care benefits are sufficient to support them.

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