AMR's American Will Freeze Pensions, Not Kill Them


Salon Staff
March 7, 2012 10:18PM (UTC)

DALLAS (AP) — American Airlines told employees Wednesday that it will freeze pensions for most workers instead of terminating them, as the company reorganizes under bankruptcy protection.

The freeze will apply to flight attendants and ground workers but not pilots. The pilots' pension plan includes a lump-sum payment upon retirement, and the company fears a surge in retirements would leave it without enough pilots to operate.

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The decision to freeze instead of terminate pensions was a surprise. Last month, American said it would terminate pension plans for 130,000 current and retired employees and hand over the plans' assets and obligations for future payments to a government agency.

The airline's unions and the U.S. Pension Benefit Guaranty Corp. opposed ending the pensions, which would have needed approval from a bankruptcy judge.

Under a freeze, workers will not earn any additional retirement benefits. But for employees, it's better than terminating the plans, which could reduce benefits for a few highly paid workers. American estimated that about 2 percent of workers other than pilots and executives might have lost some of their benefits.

The president of the Transport Workers Union, which represents mechanics and baggage handlers, said the union would have preferred keeping the current plans. But terminating the pensions "was totally unacceptable," said James Little, leading the union to propose a freeze instead.

Little said that American also dropped a demand for an additional $600 million to $800 million in annual labor-cost concessions from his group — the amount that American hoped to save by terminating the pensions.

American is negotiating with TWU and unions for pilots and flight attendants over pay cuts and contract changes that it claims would save $1.25 billion per year. If the company can't agree with the unions, it can ask the bankruptcy judge in New York to impose its terms on workers.

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