Struggling US airlines are descending on Capitol Hill seeking help with pension costs, but they are not presenting a united front.
Earlier this month Delta Air Lines and Northwest Airlines warned lawmakers that pension costs could push them into bankruptcy and pension default -- like United Airlines -- if Congress does not act.
But this week American Airlines is trying to steer lawmakers away from tailoring assistance to the worst-off airlines, while seeking help for those whose pensions are better funded, like its own.
"We are taking a message to Congress that says, 'Look, we continue to fund our pension plans, our plans are well funded, and the kind of pension reform that we need should be recognized'," Mark Burdette, Americans' vice president of employee relations, said in a phone interview on Tuesday.
American is flying in some 300 of its employees to talk to lawmakers as a House of Representatives subcommittee votes Wednesday on a comprehensive pension reform bill. Burdette said this legislation is a template for reforms that the airline prefers, although there could be "improvements".
Introduced by two prominent Republicans, Representatives John Boehner and Bill Thomas, the bill would require companies to fully fund their pensions within seven years. It would also shore up the federal pension agency by making companies pay higher premiums to the Pension Benefit Guaranty Corporation (PBGC).
Delta and Northwest told the Senate Finance Committee on June 7 that they needed much longer, about 25 years, to repair the underfunding in their pension plans. These "defined benefit" plans offer employees a fixed payout at retirement.
Delta and Northwest said they would be willing to freeze their plans -- that is, stop the accrual of benefits -- in exchange for legislation allowing them to postpone payments.
American also wants to be able to stretch out pension contributions, Burdette said, but doesn't need 25 years, and doesn't want to be required to freeze its plan to get relief.
"We actually have the best funded plan in the industry, at about 80 percent right now... We said to our employees that we would do everything that is possible to preserve our defined benefit plan," Burdette said.
Representatives Tom Price, a Georgia Republican and sponsor of a House bill that would accomplish what Delta and Northwest seek, said that instead of freezing its plan, American could agree to fund any new benefits in the year that they accrue, in order to qualify for relief under his bill.
But he also warned American might want the plan-freezing option down the road, when it might want to switch to a different kind of pension plan. "This would allow them to voluntarily modify their pension situation."
Price hopes his bill will be incorporated into pension legislation along with Boehner's proposals at some point.
Price, whose state is home to Delta, denied his proposal was an airline bailout, saying that without pension reform, more airlines would unload their pensions on the PBGC, as United is doing. This in turn would increase the risk that taxpayers would have to bail out the PBGC, he said.
A Washington think-tank warned that even the Boehner bill would not rescue the PBGC, although it would be a step in that direction. The Center on Federal Financial Institutions said the PBGC could run out of cash in 2027 with Boehner's reforms.
