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Are Passenger trains in N. America ever profitable
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<p>[quote user="schlimm"]</p> <p>[quote user="Murphy Siding"]</p> <p> Didn't the airlines require a big infusion of federal money after 911 to keep them afloat?</p> <div style="clear:both;">[/quote]</div> <div style="clear:both;"></div> <div style="clear:both;">As I recall, yes. Several have dumped their pensions onto the federal agency. And several (AA, UA, Delta?) have gone through bankruptcy reorganizations to reduce debt. [/quote]</div> <div style="clear:both;"></div> <div style="clear:both;">Dumped their pensions onto the Pension Benefit Guaranty Corporation (PBGC) is not technically correct. Under the bankruptcy laws a litigant can transfer a qualified pension plan to the PBGC as part of its plan to exit bankruptcy. </div> <div style="clear:both;"></div> <div style="clear:both;">The airlines paid what amounts to an insurance premium for PBGC coverage. Thus, for those that were in the bankruptcy courts, transferring their legacy pension obligations to the PBGC had the same effect as submitting a claim under an insurance policy. </div> <div style="clear:both;"></div> <div style="clear:both;">I don't remember the numbers off the top of my head, but a very high percentage of employees covered by a private pension plan get PBGC benefits equal to what they would have gotten had their employer not gone through bankruptcy. It is the top dogs who get slammed. For a plan transferred in 2012, for example, a 65 year old employee could have received as much as $55,840 in annual pension benefits, whilst a 75 year old employee who was retiring could have gotten more than $14,000 a month. Needless to say, there are not many active 75 year old employees when a private employer declares bankruptcy. </div> <div style="clear:both;"></div> <div style="clear:both;">Bankruptcy is a complex legal process. Coming out of it requires an exit plan that gives the emergent entity a reasonable probability of being successful. Clearly, debt reduction is one goal, but there are many other components of a bankruptcy exit plan. In the case of the legacy airlines, ridding themselves of onerous labor contract provisions was as important if not more so than debt reduction. Frequently, especially in the case of senior debt, the goal is not to walk away from the debt, but rather to restructure the payment provisions, i.e. lower the interest rates, extend the time to maturity, etc.</div>
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