How Does the UAL Displacement Bid Affect You?

Over the weekend United Airlines announced a displacement bid. Probably everybody’s seen this. How will that bid affect you and what, if anything, can you do about it? Over the weekend we’ve heard that they’re planning on displacing about 4,500 pilots; as much as 41% of the workforce. Now, we all know that the airline’s going through a brutal period, but it doesn’t mean that the airline’s going out of business. In fact, this is kind of encouraging news because usually the “M.O.” of an airline is to make its worst-case position, its worst-case scenario, available in a displacement or a furlough bid. Back in 9/11, after 9/11, I was told I’d be furloughed. That fuse actually stopped six numbers below me. Quite a few people in the end weren’t. That’s normal, because of the 60 day wait that they have to give both certain States and the federal government before mass furloughs as a result of the Warren Act. They want to make sure that they overshoot, not undershoot.

Also, it’s possible, certainly not guaranteed – anything’s up for grabs right now – but it’s possible that there’ll be a buyout for people with less than two years to go. I don’t know anything that you don’t know. I’m just saying this has happened in the past. It probably makes sense at some level to say, “Okay, we’ll buy you out, but we’re going to pay you monthly”, or something like that. That also would affect the numbers furloughed. I keep hearing of people bailing, or talking about bailing, to protect a lump sum when they’ve got four, five, or six years left. If you’ve got an $800,000 lump sum or a $600,000 lump sum, it doesn’t make sense to give up, even with pay cuts, a million dollars or more to protect that 800,000. You are going from saving, letting your nest egg recover, even hopefully grow well after the dust has settled, to “Now I’ve got to live on this nest egg” in what is starting out as an extremely uncertain environment. And we forget the annuity has value. In fact, the lump sum is the present value of the annuity. They should be almost of equal value.

That annuity is safe. It’s unlikely that PBGC is going to shut down anything. In fact, they’re going to fight any attempt by the airlines, in court, given how much money the government has already provided for them. Really, the only risk that exists is that to the lump sum itself, and that’s not significant in terms of do you quit a job where you have four years left. It’s just not worth it. If you’re looking at significant pay cuts, you also need to be looking at how do you tighten your belt. Where do you cut costs? What can you do differently? Because I’m going to tell you, a lot of pilots, they spend right up to their paycheck. We know that; we see it. We’re going to be putting together a lot of information, a lot of advice, a lot of ideas that we’re happy to share with anybody who asks. Certainly reach out if you want more information. Meanwhile, we wish you all the best of flying success. Thank you.