Feds pressure American Airlines to save pensions
Wednesday, February 1, 2012
DALLAS (AP) — The federal pension-insurance agency filed $91 million in liens against American Airlines property in a bid to pressure the company to save its retirement plans instead of dumping the obligations on the agency.
The agency said Tuesday it was forced to file liens when American, which filed for bankruptcy protection in November, paid only $6.5 million of a required contribution of nearly $100 million toward its pension plans last week.
The move escalated a fight between American and the Pension Benefit Guaranty Corp., whose director accused the company of pocketing pension relief money instead of putting it into workers’ retirements.
American’s parent company, AMR Corp., and its chief bankruptcy lawyer have raised the possibility that the company could freeze or terminate pension plans that cover about 130,000 employees and retirees. The company could make its intentions clear on Wednesday, when it presents new contract proposals to its unions.
The pension agency filed liens in Texas, Delaware and Washington, D.C., to get paid if AMR tries to sell assets that include real estate such as ticket offices in Latin America.
The agency’s director, Joshua Gotbaum, said he wanted to see American reorganize and prosper, but “without killing its employees’ pension plans.”
AMR spokesman Bruce Hicks said that AMR’s operating units are under protection of the bankruptcy court, “and the liens will be dealt with routinely in the company’s restructuring.”
Hicks added, “We agree with Mr. Gotbaum’s statement that the most important thing is for American Airlines to reorganize successfully and succeed as a business.”
American’s four traditional pension plans have assets worth about $8 billion and obligations that the pension agency estimates at $18 billion.
If American terminates the plans, the agency would take over the assets and pay benefits of up to $54,000 per year for each retiree. By the company’s estimate, 10 percent of employees and retirees could see their promised benefits cut.
The pension agency has filed liens in many other bankruptcy cases, although it doesn’t always hold a conference call with reporters to announce such moves.
Gotbaum said the agency went public against American for three reasons: The large number of employees affected, that other airlines have reorganized without killing pension plans, and that AMR has underfunded its plans even after getting pension relief from Congress in 2007.
The agency estimates that AMR, which had $4 billion in cash when it filed for bankruptcy protection, has saved about $1 billion because of Congress’ intervention.
“One billion dollars didn’t go into American’s pension plans,” Gotbaum said. “Instead, that $1 billion is 25 percent of their entire bankruptcy war chest.”
More like this story
Use the comment form below to begin a discussion about this content.
Please review our Policies and Procedures before registering or commenting