Aloha requests end to pensions

Aloha Airlines, taking a painful step to emerge from reorganization, has asked the federal Bankruptcy Court for approval to terminate pensions for approximately 3,000 employees and retirees.

The carrier, which included the action in a recent filing as part of its plan to emerge from bankruptcy, also said it will pay its unsecured creditors less than 5 cents on the dollar. Aloha said it owes about $60 million to more than 250 creditors.

By contrast, Hawaiian Airlines repaid its unsecured creditors in full after emerging from a 26-month-old bankruptcy in June.

The pension termination request, which needs court approval along with the rest of the reorganization proposal, would transfer the onus of paying the retirement benefits to the Pension Benefit Guaranty Corp., a federal agency that insures pension benefits. However, shifting the pension responsibility to PBGC could result in some Aloha employees having their pension benefits cut. Aloha is seeking to terminate the defined-benefit plans for its pilots and mechanics prior to the company emerging from bankruptcy at the end of the year.

A group of about 90 retired pilots have asked the court for approval to form a committee to protect their interests.

The pension termination doesn't apply to all the airlines' employees because some of them, such as the flight attendants, have 401(k)s, which are defined-contribution plans that make the employees responsible for their investments. Under defined-benefit plans, the investment risk is the responsibility of the company.

Aloha received court approval earlier this month to proceed with scheduling on a reorganization plan being proposed by two Los Angeles-based investment groups.