Federal agency sounds alarm on American Airline's pensions

Federal agency sounds alarm on American's pensions
Jan. 26, 2012 11
American Airlines, AMR Corporation
By Andrea Ahles - star-telegram

Despite what American Airlines says, the Pension Benefit Guaranty Corp. thinks the airline's workers should be worried about their pensions.

Responding to a letter that American executives sent to employees this week, the agency issued a statement Thursday saying that the Fort Worth-based airline is downplaying the potential consequences of terminating its pension plans in bankruptcy court. It said the airline has estimated that the pensions of some 13,000 workers could be cut.

"American Airlines is telling their workers and retirees not to worry, but they should," agency spokesman J. Jioni Palmer said. "American said nothing's been decided yet but didn't even bother to pretend that it was trying to preserve its employees' pensions."

Workers may learn the plan for their pensions next week when American meets with three unions to discuss the airline's restructuring. Executives have indicated that they want to use bankruptcy to trim labor costs to better compete with other airlines that have shed costs in court.

In the letter sent Monday, American said more than 90 percent of its workers would see no cuts in their pension benefits even if the plans are terminated. The airline's pension plans cover 130,000 workers and retirees.

The PBGC, which insures pensions based on employer contributions, has been publicly challenging American to keep its pensions ever since the airline filed for bankruptcy Nov. 29.

This month, the federal agency asked the bankruptcy judge to issue subpoenas so the agency can obtain testimony and to force AMR Corp., American's parent, to produce documents related to the plans.

The PBGC has argued that since AMR entered bankruptcy with more than $4 billion in cash, it should have paid some of that money into its pension plans.

On Thursday, the PBGC also noted that it doesn't insure retiree health benefits, which it says are typically canceled when pension plans are terminated.

American has yet to disclose what it wants to do with its pension plans. On the day AMR filed for bankruptcy, the PBGC estimated that the plans had $8.3 billion in assets to cover about $18.5 billion in benefits. The agency, which would assume responsibility for paying benefits if American ends the plans, estimated that $1 billion in benefits would be lost.

On Thursday, the airline stood by its letter to employees.

"We have provided accurate information to our employees and retirees," said American spokesman Bruce Hicks. "We will continue to communicate the facts to our employees and to work diligently towards the bright future a successful restructuring will bring."

Employee concerns about pensions were heightened last week when American made a $6.5 million pension contribution instead of the $100 million payment that was scheduled.

"Rest assured that whatever happens with our pension plans will happen as part of a comprehensive business plan aimed at making American Airlines a successful and profitable company that can grow and prosper for many years," Jeff Brundage, American's senior vice president of human resources, said in the letter.

Workers may soon get answers. On Wednesday, American has scheduled a meeting with leaders of the Allied Pilots Association, the Association of Professional Flight Attendants and the Transport Workers Union, which represents mechanics and ground workers.

On Thursday, the TWU told its members that AMR's chief restructuring officer, Beverly Goulet, will present the company's new business plan and that Brundage will "discuss proposed changes that affect all unions."

Company negotiators will then meet separately with each union to present specific proposals, Robert Gless, deputy director of the TWU's Air Transport Division, told members. American Eagle will meet with AMR officials later in the day.

In the bankruptcy process, labor contracts can be altered under Section 1113 of the bankruptcy code. American has not filed any motions with the bankruptcy court asking to modify labor agreements with its pilots, flight attendants, mechanics or ground workers.

Read more here: http://www.star-telegram.com/2012/01/26/3691475/federal-agency-sounds-alarm-on.html#storylink=cpy