AMR To Seek End To Worker Pensions - PBGC
The US Pension Benefit Guaranty Corporation, which has responsibility for insuring certain benefits under private defined benefit pension plans, said on Tuesday it believes American Airlines will seek to terminate employee pensions in bankruptcy.
The agency said it filed a USD$92 million lien against American parent AMR for the balance of unpaid pension plan contributions. It added that the lien was applied to AMR assets outside the United States, mainly in Latin America.
American filed for Chapter 11 protection in late November, citing uncompetitive labour costs. The carrier has yet to issue a cost-savings target and did not comment on the PBGC statement.
Airline unions expect American to detail its targets for labour cost cuts this week, but they do not know what the goals may be.
"We believe that tomorrow they will outline the size of the cuts at American," said Jamie Horwitz, spokesman for the Transport Workers Union.
He said he did not know when the workers of American Eagle, AMR's regional carrier, would learn the cost savings targets for that airline.
PBGC continues to press AMR for information about pensions. The agency said it is not convinced from the data it has received, and the airline's cash on hand that plan terminations are necessary for the airline to reorganise.
It is not uncommon for US pension insurers to file liens in bankruptcy cases. Collecting on liens may need bankruptcy court approval.
Liens have been filed on behalf of four pension plans - against aircraft, real estate, and other assets.
The PBGC is an unsecured creditor in the American bankruptcy.
American has not said whether it will terminate pensions covering 130,000 workers and retirees to save money.
The PBGC estimates that American's pension shortfall - the difference between the assets of its plans and promised benefits - is USD$10 billion. If those plans were terminated today, the agency said it could not make up the entire amount of underfunding.
American paid USD$6 million in pension contributions on January 15 out of just under USD$100 million owed for the fourth quarter. The next contribution is due April 15.
"We want American Airlines to reorganise successfully and succeed as a business. We would like it to succeed as a business without killing its employee pension plans," PBGC Director Josh Gotbaum said.