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MINNEAPOLIS – The sting of the Sept. 11 tragedy not only wounded the airline industry through thousands of layoffs and flight cutbacks, its impact spilled over to airline-affiliated credit unions, forcing most to rethink their charters. NWA Federal Credit Union and American Airlines Federal Credit Union both applied for and were recently granted NCUA approval to expand to trade, industry and profession (TIP) charters. The expansion allows both credit unions to serve anyone who works in, or is retired from the air transportation industry in the United States, including employees of the Federal Aviation Administration, the Transportation Security Administration and airline contractor employees among others. TIP allows a single sponsor occupational credit union to diversify its field of membership while still continuing to serve the people who work in a single industry or profession. NCUA adopted the revised field of membership rule in March 2003. Officials at $1.4 billion NWA FCU are quick to say that its decision to expand had more to do with the shambled state of the airline industry than an ongoing lawsuit between it and Northwest Airlines. The Minneapolis-based airline filed a suit in July 2003 against the credit union when it refused to pay annual licensing and royalty fees for what it claims are the use of its name and logo – trademarks NWA FCU said it has amicably used for years. “Changes in the airline industry have caused us to look at the future of our business. Northwest, like other airlines, is not growing as it once did,” said Paul Parish, NWA FCU president/CEO. “For our organization to grow and prosper, we must continue to add new members. This is more difficult when our primary sponsor, Northwest Airlines, is not adding new employees.” Northwest had previously threatened to not renew the leases of several credit union offices on the airline’s properties if the licensing and royalty fees were not paid. The airline has since backed off agreeing to extend July 5, 2003 subleases in two hub cities to March 21, 2004. Still, NWA FCU moved forward in its search for other properties and at press time, two new offices were scheduled to open in Minneapolis/St. Paul and Detroit in the first quarter of 2004. Parrish has kept the credit union’s 118,000 members up to date on TIP and the lawsuit on its Web site reassuring them that “while we’ll be accepting new people into our membership, our primary focus will remain on the employees and retirees of Northwest Airlines and their families. They are, and will continue to be, the largest single group in our membership.” Indeed, 90% of the credit union’s members are Northwest employees, Parish said. NWA FCU’s new TIP charter will go into effect in early 2004. TIP Offsets Delinquencies, Bankruptcies The relationship between $3.7 billion American Airlines Federal Credit Union and its main sponsor group, American Airlines is not as strained. But the credit union suffered a wallop due to member layoffs and subsequent bankruptcy filings and delinquent loan payments, said John Tippets, AAFCU president/CEO. “Members have been hit by unemployment in ways we’ve never seen before,” Tippets said. “Sept. 11 changed a lot of things in their world and our world.” Discussions on converting to TIP began more than a year ago as the credit union “watched NCUA and its progression with how they wanted to handle TIP,” Tippets said. The 15-month process will finally see its fruits when AAFCU begins the new charter conversion in mid-January. “This seemed like an opportunity to offset the negatives because it gives us a chance to use our existing delivery channels and brand and continue to maintain our strong relationship with American,” Tippets said. Nearly 80% to 90% of AAFCU’s existing membership is affiliated with American Airlines. Roughly 50,000 new members are expected to join over the next 5 to 10 years through TIP, Tippets said. Likewise, with $1.8 billion of its funds in low yielding investments “best used in good quality loans,” an expanded membership opens up the window for more lending, Tippets said. “There are interesting parallels in American’s business models and what we are doing with TIP,” Tippets explained. “American, for good reason, has interline agreements, code share arrangements, and the one world alliance. They work cooperatively with other airlines, airports and air transportation government agencies to accomplish mutually shared objectives for aviation safety, adequate facilities and passenger and cargo services.” The credit union has taken an aggressive approach to reassuring its existing members that their ties are strong. In its January 2004 member newsletter, Tippets cites a timely quote from Federal Reserve Board Chairman Alan Greenspan at a Congressional hearing a few years ago. Tippets said Greenspan was asked whether it was important for credit unions to have the opportunity for continued growth. “His answer, in part, was `they should expand because that is basically the nature of a viable institution. If it doesn’t expand, it dies,’ ” Tippets pointed out. State CUs Beef Up SEGs As Delta Airlines continued to drain its pool of new hires, $2.4 billion Delta Employees Credit Union’s Board of Directors began earnest dialogue on diversification strategies. Because the state-chartered credit union is not afforded the TIP charter option available to federal credit unions, it sought to tap into its existing 176,000-membership base for expansion. The Atlanta-based credit union submitted a proposal to the Georgia Department of Financial Institutions on an expanded definition of immediate family member, said Joe Williams, DECU’s president/CEO. An answer was expected by the end of 2003, Williams said, but at press time, a decision had not been reached. Delta Airlines has slashed more than 13,000 jobs since the Sept. 11 attacks. “ It’s quite simple,” Williams said. “The airlines are not hiring and we need to grow our membership. The bottom line is, even with TIP, members are going to benefit. In the end, members are what count.” Chicago-based United Airline Employees Credit Union has added 30 new select employee groups since November 2003 and its membership is now open to 19 counties after receiving approval last year to expand to a community charter. The $4.5 billion credit union chose the multi-SEG route to offset the financial devastation United Airlines has experienced over the past few years. “It made sense in light of our sponsor’s condition,” said David Mooney, United Airline Employees CU’s president/CEO. “United continues to be our primary group and we think the (expansion) will be mutually valuable for everyone.” Mooney has been at the helm for nearly nine months and during that time, the credit union’s diversification plan continues to focus on its existing infrastructure and identifying untapped segments where its services could be used. “As we approach SEGs on what we have to offer, they’ve expressed a need to have the credit union option available to their employees,” Mooney said. “From a concentration standpoint and maintaining healthy growth, we’re assured we’ve made the right decision.” NCUA Chairman Dennis Dollar echoed many of the airline-affiliated credit unions’ quests for survival at an October 2003 meeting that saw the first TIP charter granted to Concord, Calif.-based NW Preferred Federal Credit Union. “TIP strengthens the long term viability of credit unions by providing a diversification option for single sponsor credit unions that feel they need that type of risk and membership diversification, and as a safety and soundness regulator NCUA sees great potential value in TIP for some of those credit unions,” said Dollar. 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