FAA Reauthorization Act of 2007 - Continued
Floor Speech
FAA REAUTHORIZATION ACT OF 2007--Continued -- (Senate - April 30, 2008)
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Mr. DURBIN. Mr. President, I greatly respect the Senator from Iowa. I know he may have to leave, but I do have to tell him I disagree with several things he said.
First, the point he raised: Why wasn't I in the Finance Committee stating my position? I am not a member of that committee and I do not know the procedure that was followed by the committee.
I will tell you, in this Federal Aviation Administration authorization bill, this is the only pension provision. To think this is a pension bill and we should have been forewarned that airline pensions would be part of the discussion about keeping America's skies safer and air travel safer came as somewhat of a surprise.
I learned of this amendment last week. I have known for a long time the position of the chairman and ranking member in opposition to my position on this issue, and I knew the day would come when we would revisit it.
But there are several things here which I think have to be said: First, freezing a pension plan might not sound like much unless you are a retiree. A frozen pension, which is what we are talking about with some airlines, would disqualify new workers from qualifying for the pension and restrict the airline from expanding any benefits under the retirement plan.
That is a frozen plan. That is what happened with several airlines as they faced and went into bankruptcy. They froze their plans. They said to their retirees: Times are tough. We cannot cover new employees. We cannot give you anything more; it is frozen.
Now, they were given pretty good treatment by the Finance Committee. In fact, they were given the most preferred treatment of any corporations in America. They were allowed to fund their pension plan over a longer period of time than any company in America, 17 years, and they started with an imputed assumption of 8.85 in terms of--as the Senator from Iowa called it the discount rate or others, the interest rate. But they were given this preferred position. It applied to two airlines, Northwest and Delta.
Now, what about the rest of the airlines? They were put in a different category. In their situations, airlines such as American Airlines did not freeze their pension plans; new workers came into their pension plans; benefits could be improved in their pension plans.
They were told: You will not be given the preferred treatment given to those that freeze their pension plans. It seems like it is upside down. You would think we would be benefitting those companies that are trying to do better by their employees. But, instead, we went the other way and said: We limit their catchup funding and liability to 10 years and the imputed interest to 8.25 percent, not as good a deal, and in the world of hundreds of millions of dollars, a very expensive difference between frozen pension plans and those that still have active defined benefit plans.
So now comes the argument with this new amendment in the Federal Aviation Administration authorization bill, that we have to freeze the current level of contributions being given by the airlines. Well, let me give you an example of what that means. In the instance of American Airlines, they have not only funded their liability to 100 percent, they have added more, despite the tough economic times.
Their funding level is 115 percent. It is not as if they are trying to pull anything over on their workers and retirees, they are putting more money in than they are required, even in these tough times.
The effect of this amendment, if it is not removed, is to hold them at that 115 percent contribution. What does it mean to the airlines such as American? It means $1 billion over 5 years. It means $200 million each year to keep the funding level way beyond the 100 percent that is necessary.
Now, if these were prosperous times, and these were companies that were making money, having record profits, you might be able to make that argument. I am not sure how, but you might be able to make it. But exactly the opposite is true.
I think the Senator from Iowa knows as well as I do how many airlines have gone bankrupt. The first time I met the Senator from Iowa, we were flying together on Ozark Airlines. That goes back a few years. Then we were flying together on TWA. That goes back a few years. And these airlines are gone. In the last few weeks, another five airlines are gone. This is a very risky business with the cost of jet fuel.
To say: Well, this will not hurt the airlines, another $200 million a year, just have them keep overfunding their pension liability is to ignore the obvious. As dangerous as it may be to have an unfunded pension plan, it is even more dangerous to be working at a company that goes into bankruptcy. I have been with companies that have gone through this PBGC. They do not always come out whole at the end of the day. There are limits on what the PBGC will pay, in terms of outstanding benefits to workers. They can end up with less.
So what we have is a circumstance where the Finance Committee is wanting to roll the dice. They want to bet that American airlines in general, not the American Airlines but American airlines in general, that do not have frozen benefits plans are going to start making a lot of money. They seem to think the price of a barrel of oil is going to go down; they think the cost of jet fuel is going to go down; they think these airlines are going to be flush with cash and be able to overfund their pensions.
Well, that is one possibility, but you would have to say, looking at what has happened over the last several weeks, not very likely; it is more likely that airlines will continue to face the pressure of increasing energy and fuel costs, more airlines will be flirting with bankruptcy, they will be struggling to meet the bottom line.
United Airlines laid off 1,000 workers last week, a $500 million loss in the first quarter. I think it is the largest they have ever sustained. Things do not look that rosy.
What Senator Hutchison and I are saying is be careful. Do not toy with the pensions of so many workers. Do not bet the farm, even an Iowa corn farm, on the possibility that things are going to get better for the airlines. Be conservative. Be careful. But protect the workers in the meantime. So as you listen to the Senator from Iowa close and say: Well, if you want to put more money in the pension system, vote against this amendment. If you want to take money out, vote for it.
I would say to the Senator, there is only one problem with his argument: 150,000 of the 180,000 workers affected by your amendment support the Durbin-Hutchison amendment. They believe it is far better to maintain the current system of funding, not jeopardize these airlines so they might go into bankruptcy, have fair funding that makes sure these retirement benefits can continue to be paid. That is a fact.
When Senator Baucus, the chairman of the committee, came to the floor earlier, he said he wants to level the playing field. Well, the current law is already unfair. The field is far from level. And section 808 makes this inequity even worse, even worse.
It tips the playing field heavily on the side of Delta and Northwest at the expense of the other airlines, the five that would be hit by this. I urge my colleagues, if we are going to err, let's err on the side of caution. Caution tells us: Good funding of the pension liabilities in a difficult economic climate, with airlines going into bankruptcy, listen to the workers whose pensions are at stake and vote for the Durbin-Hutchison amendment.
I yield the floor.
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Mr. DURBIN. Madam President, I wish to thank the Senator from Montana. We have had some words today, some positive and some not so positive, but I hope we can follow through on this conversation and this dialogue and try to see if there is common ground. I don't know if there is, but I am willing to try, and I hope we can see if we can achieve it.
I offered with Senator Hutchison to have a vote earlier today and that didn't happen. But at this point I hope we can find a way to reach an amicable solution. This pension issue is a very important issue to thousands and thousands of workers and to many communities that are served by these airlines. We worked hard and I think had a sizable number of Senators who supported our position, but you never know until you take the actual vote. I will say the underlying bill, after all this conversation about the pension plans affecting five airlines--and the tax provisions, which, frankly, I support--I think the tax provisions in this bill are good, relative to rail bonds, to the New York situation, and to the highway trust fund. I support that. I am happy to support it. But we want to make sure that at the end of the day, the underlying bill is enacted into law. This is long overdue to bring modernization and safety to our skies, and I know the work that has been put into it by the Senator from Texas and especially the Senator from West Virginia.
So I am prepared to sit down and meet with anyone in good faith to try to resolve this if we can. I hope that at the end of the day, though, what the majority leader said a few minutes ago is remembered. He is looking for any germane amendments relative to this bill and is prepared to engage a debate on both sides. He used this procedural approach to try to break a logjam, but he clearly is looking for a way to move to amendments and most importantly to pass this bill. I think that was a good-faith offer, and I know he is a man of his word. So we are prepared to work with Senator Rockefeller and Senator Hutchison and all the Members to try to resolve these differences.
I yield the floor.
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