Aa And Pensions

[Hopeful]

Press Release Source: American Airlines


American Announces a $75 Million Contribution to Its Defined Benefit Pension Plans, Raising Total Contributions This Year to More Than $200 Million
Tuesday June 21, 5:08 pm ET


FORT WORTH, Texas, June 21 /PRNewswire-FirstCall/ -- American Airlines announced today that it has made a $75 million contribution to its defined benefit pension plans. This is in addition to the $138 million American contributed to the defined benefit plans earlier this year, bringing its total contributions to the plans in 2005 to more than $200 million.
"American remains strongly committed to its pension plans and to restructuring our company in ways that will allow us to continue to afford our pension obligations," said Gerard J. Arpey, the airline's Chairman and CEO. "The contributions we have made to the defined benefit pension plans this year underscore the progress we, our people and our unions have made -- working together -- in helping the company build the financial stability it needs to maintain the plans and work toward a secure retirement for our employees."

Arpey noted that American has been working closely with its employees and its unions on pension-reform legislation. A large group of American employees and union officials will be rallying on Capitol Hill in Washington, D.C., tomorrow in support of measures that would make funding employees pensions more affordable and more flexible, without transferring these obligations to the government.

With its defined benefit pension plans currently funded at about 80 percent, American has the best-funded defined benefit plans in the industry.

Current AMR Corp. (NYSE: AMR - News) news releases can be accessed via the Internet.


The address is http://www.aa.com

 

[Wretched Wrench]

Here is more of the same, with a little more information:

American Makes Pension Contribution
06.21.2005, 06:34 PM

American Airlines, the largest U.S. air carrier, on Tuesday said it made a $75 million contribution to its defined pension plans as part of an agreement with its unions to protect the funds.

So far this year, American Airlines parent AMR Corp. has invested $138 million into the plans, bringing the total amount to $200 million. The air carrier pledged to unions in 2003 that it would maintain pension levels, while unions agreed to $1.8 billion of concessions to stave off bankruptcy.

Illinois-based UAL Corp.'s United Airlines and US Airways Group Inc. have dumped their pension plans through bankruptcy restructuring and other carriers are threatening to do the same. AMR and other airlines have been lobbying lawmakers for legislation that would give their companies more flexibility in funding pension plans.

American said a group of its employees and union officials will be rallying on Capitol Hill in Washington, D.C. on Wednesday to support measures that would make funding employee pensions more affordable and flexible.

"American remains strongly committed to its pension plans and to restructuring our company in ways that will allow us to continue to afford our pension obligations," said AMR Chairman and Chief Executive Gerard J. Arpey in a statement.

The chief executives of Northwest Airlines Corp. and Delta Air Lines Inc. told senators that their companies may have to seek bankruptcy court protection unless Congress gives them a 25-year extension to meet multibillion-dollar funding gaps in the pension benefits promised to workers.

In exchange, the executives pledged to switch workers to defined contribution plans, such as 401(k)s, and freeze existing pension benefits at current levels in order to limit the financial exposure of the federal Pension Benefit Guaranty Corporation, which has its own ballooning deficit because of defaults of the defined benefit plans of United, US Airways and others.

Shares of American Airlines rose 29 cents, or 2.2 percent, to close at $13.23 on the New York Stock Exchange.


--------------------------------------------------------------------------------

 

[Wretched Wrench]

Notice that AA calls it a "contribution" rather than a required payment. A contribution is voluntary and done out of the goodness of the donor's heart. Neither applies here.

Since when does making a required payment call for a press release and a joint lovefest from the tame unions?

 

[FWAAA]

Notice that AA calls it a "contribution" rather than a required payment. A contribution is voluntary and done out of the goodness of the donor's heart. Neither applies here.

Watch out, George Carlin.

Dunno. The word "contribution" has been used for many years in describing pension funding. "Payments" usually refers to benefits paid to retired workers.

Ever notice how the other type of plan is called a "Defined CONTRIBUTION" plan? Shouldn't it be called a "defined PAYMENT" plan?

Since when does making a required payment call for a press release and a joint lovefest from the tame unions?

[post="278337"][/post]​

Given that CO announced a $50 million funding of its DB plans last week with a press release, AA had to blow its own horn in funding its plans with $100 million this week.

 

[Wretched Wrench]

American Air Employees Go To Washington

By ELIZABETH SOUDER
June 22, 2005 6:07 a.m.

Of DOW JONES NEWSWIRES
WASHINGTON -- Nearly 300 AMR Corp. (AMR) employees will gather on Capitol Hill Wednesday to lobby for more time for the world's largest airline to fund its pension plan.

They're also attempting to prove that an old-fashioned defined benefit plan is a viable retirement option, as rival airlines are attempting to freeze or dump their old plans and start modern 401k-style plans.

"We are not victims and we can, and will, control our own destiny," said Chief Executive Gerard Arpey at a reception with the employees late Tuesday.

Like other legacy carriers, American faces big pension payments beginning in 2007, said William Ris, head of AMR's legislative affairs. But American isn't, at this point, likely to have to file for bankruptcy if it must make those payments, Ris said.

Instead, it's the defined benefit pension that's at stake, as well as a promise Chief Executive Arpey made to employees when they agreed to deep concessions in 2003 in order to keep American out of bankruptcy. Arpey promised not to change the pension plan.

Now, some executives and employees--including Arpey--are recognizing that the chief executive can't guarantee he'll protect the pension, beloved by employees because of the level of retirement security it provides.

Arpey said the airline will "hopefully maintain our defined benefit plans," and there's a "very good chance of returning the plans to their historic fully-funded status."

Defined benefit plans are important to employees because they lock in a set level of benefits the company will pay employees after retirement. Trouble is, if the plans become underfunded due to changes in the stock markets or interest rates, the law requires companies to add more money to the plans to keep them healthy.

A more modern defined contribution retirement plan keeps a company's pension costs stable, but the payout for retirees isn't a set amount, but depends on how well the money is invested.

If Congress doesn't pass legislation this year allowing airlines extra time to fund their defined benefit plans, "We'll be facing next year some really tough decisions about whether we can make it through the next couple of years" with the pension plan intact, Ris said in an interview with journalists. "We'd be facing a really big cash requirement in 2007."

Ris declined to speculate exactly how large that requirement might be, but he said it would be "significantly" larger than what AMR has been paying on average each year for the past few years, around $400 million to $500 million.

Ris and the AMR employees are asking Congress to pass legislation that would give the company 10 years to fund its pensions by 90%, and 15 years to fully fund the plans.

Delta Air Lines Inc. (DAL) and Northwest Airlines Corp. (NWAC) also have been stumping for legislation that would give airlines more time to fully fund their plans, which are underfunded by billions of dollars. But Delta has already frozen its defined benefit pension plan, and Northwest is attempting to do the same. The bill they've been supporting would give airlines 25 years to fund their plans, but airlines would have to freeze their defined benefit plans and move to 401k-style plans in order to be allowed the extra time.

Further, the Air Line Pilots Association, the union that represents pilots flying for Delta and Northwest, supports pension freezes as a way to protect the benefits pilots have already amassed.

But American's pilots union, called the Airline Pilots Association, as well as other AMR unions, wants to keep the defined benefit plan intact.

"These were promises made to our employees," said Tim McAninley, communications coordinator for the Transport Workers Union, which represents AMR mechanics.

But he added that Chief Executive Arpey "doesn't have a crystal ball. He can't guarantee" the pensions won't change.

---------------------------------------------------------------------------------


Pay particular attention to the last two sentences. They devalue or even negate all previous utterances with regard to our pensions. It's called a Welch Clause.

 

[Whadayano]

So the whole reason for the p.r. about the $75 mm was because of the staged hoopla for the Congressional mau-mauing, to use Tom Wolfe's expression.

 

[TWU informer]

Why aren't the Unions asking Congress to pass legislation that would STOP the underfunding that led to this problem to begin with?

Instead, they are lobbying with Corporate America to allow further underfunding of our retirement plans.

Is there NO ORGANIZED LABOR left in the United States?

Are Unions now Company Lapdog Dues Collection Agencies?

 

[upsilon]

Some people are never happy!

FWAAA, you and I have been around this board long enough to know that there is a group of about two dozen regular posters who will never give AA management credit for ever doing anything right - or for any but the most selfish of motives.

They question the AA motives in defending the DB plan while criticizing those who want to convert to a DC plan They would find fault if the DB plan were fully funded on the basis that these funds could have been used to restore give-backs.

As a PLT AA pax, I'm just happy they find this board an outlet for their 'attitude' and frustration. These people are the AA counterparts of the UA employees who actually owned UA; but as Rick Dubinsky, the ALPA member of on the UA Board, said “We don’t want to kill the golden goose. We just want to choke it by the neck until it gives us every last egg.â€￾ UA has been on the 'slab' for some time and those that got those "industry leading" eggs have been and are still giving them back - in Spades.

Now the tables have turned and all of the other 'geese' are in mortal danger: NW, DL, US and CO. Airline employment (whether in-flight, on-the-ground CS or hi-tech AMT) is no longer the glamour job with top pay scale and great travel perks.

From everything I hear, I think AA under Arpey is trying to change the employee relations culture of AA while obviously doing everything he can to cut costs and stay out of BK. I have been happily flying AA since the days of C R Smith and personally knew Al Casey (from before his time with AA). I had a love/hate feeling for Crandall; and I once applauded Carty for MRTC, but for little else. It seems to me that Arpey is on the right track; and my AA employee friends and most of casual contacts agree.

It seems to me that most of the dissent on the board is in the AMT ranks - those who have spent many years and dollars accumulating seniority, training and skills in the highly respected aviation industry; but who now find themselves no longer needed and/or able to look forward to increased income. They face going out into the (probably better paying) 'cruel' world of non-union, non-seniority, non-travel perks employment - for them it is not pleasant!

 

[FWAAA]

Why aren't the Unions asking Congress to pass legislation that would STOP the underfunding that led to this problem to begin with?

Instead, they are lobbying with Corporate America to allow further underfunding of our retirement plans.

[post="278386"][/post]​

Probably because union leaders are smart enough to know that the plans didn't become underfunded because of any mismanagement, negligence or stupidity.

They became underfunded as a result of a perfect storm of historically low interest rates (like a fed funds rate of ONE PERCENT, for Chrissakes) plus a stock market decline beginning in 2000.

AA's recent contributions to its DB plans (over the past three years) are the largest annual contributions in AA's history. Never before has AA had to contribute so much money to the plans to satisfy the acturaries. If interest rates rise (as almost everyone expects them to), the plans' underfunding rapidly disappears rapidly.

As upsilon pointed out - if AA did fully fund its plans tomorrow with all its cash, you and Owens would loudly complain that the money could have been used to provide wage and benefit restorations instead.

AA's defined benefit pension trusts have plenty of assets right now to meet payments to retirees. On an actuarial basis, they will need more money (or higher interest rates or higher equity values, or a combination of all three) to meet their obligations far into the future. So what does it matter if AA conserves its cash right now rather than placing it under the mattress (the DB trusts)??

Do you have the total of all your future mortgage paymemts and vehicle loan payments in a bank account right now to secure those loans? If not, why not? What are you waiting for? After all, you promised to make all those payments way off in the future - so why aren't you willing to fund those promises TODAY??


upsilon: Agreed. At least the AA employees I encounter at the airports and on board don't come off as anywhere near as disgruntled as the dozen or so regulars here. But then again, passengers don't encounter very many AMTs in their daily travels.

There are a couple of regulars here who seem to want to see AA in bankruptcy. They recite how the employees at USAir and UAL are still better off than AA employees even after multiple rounds of concessions. They have absolutely no idea what bankruptcy means.

 

[Wretched Wrench]

Do you have the total of all your future mortgage paymemts and vehicle loan payments in a bank account right now to secure those loans? If not, why not? What are you waiting for? After all, you promised to make all those payments way off in the future - so why aren't you willing to fund those promises TODAY??
.

[post="278430"][/post]​

I suspect that almost all of us pay our house and car payments on time, according to the rules, and with no press releases or fanfare with the payment. And we do not go to congress asking for extensions.

 

[Hopeful]

http://www.forbes.com/work/2005/06/23/pens...ootix&referrer=

 

[upsilon]

How about this....

http://www.suntimes.com/output/business/cst-fin-amer23.html

CHICAGO SUN-TIMES

American CEO pushes pension reform

June 23, 2005

BY MARY WISNIEWSKI Business Reporter


WASHINGTON -- American Airlines' CEO Gerard Arpey received what might be a rare tribute in Washington, D.C., Wednesday in an industry roiled by economic and labor tensions --a standing ovation from employees.

Arpey and about 300 American Airlines employees, including the heads of its flight attendants', pilots' and transport workers' unions, came together in D.C. this week to tell Congress they want to save their pension plans. American wants pension reform -- but not laws that would make keeping its plans more difficult.

"We are following a different course," Arpey told employees at a Wednesday morning rally, referring to American's decision to keep and fully fund its plans. "Our concern is that Congress might take action to jeopardize the progress we've made."

"We don't want any harm done," said Chicago flight attendant Carol Maluga, among the American employees meeting in small groups with legislators to explain the company's position. "We like the way things are going."

 

[AMFAMAN]

How about this....
Business Reporter
WASHINGTON -- American Airlines' CEO Gerard Arpey received what might be a rare tribute in Washington, D.C., Wednesday in an industry roiled by economic and labor tensions --a standing ovation from employees.

[post="278450"][/post]​

Let's see what kind of tribute he would get in the breakrooms with his speech. Anyone can get a standing O in a controlled environment with 300 handpicked employees.

 

[FWAAA]

I suspect that almost all of us pay our house and car payments on time, according to the rules, and with no press releases or fanfare with the payment. And we do not go to congress asking for extensions.

[post="278438"][/post]​

I don't doubt you.

Pension rules require more strict funding than just about any other debt. Those restrictive rules were partly to blame for UAL and USAir terminating their plans.

So what's so bad about lengthening the catch-up period? After all, it's not like the trusts lack sufficient assets to continue benefit payments to retirees.

It's sorta like a reservoir. A drought causes the level of the water to fall below the optimal point. But the reservoir still has enough water in it to supply all the needs for the forseeable future.

Just like the AA pension fund trusts.

We could replenish the reservoir quickly by not using or drinking any water at all until it is full. Or we could simply conserve and use a little less water. The first option is fatal, the second option is livable.

Rapid funding of the pension shortfall is an arbitrary and probably fatal solution for AA and other similar companies. Lengthening the catch-up period won't cause benefit checks to bounce and will give AA some breathing room. Why would anyone oppose that? Especially if you work there?

 

[Wretched Wrench]

. Lengthening the catch-up period won't cause benefit checks to bounce and will give AA some breathing room. Why would anyone oppose that? Especially if you work there?

[post="278482"][/post]​

The farther behind one gets in meeting financial obligations, the more difficult it is to catch up. I fear that AA would use the money for other things, and would not be able or willing to fund the retirement plans for the rank and file.

I guess it boils down to trust and fear.

BTW, I can't remember, has AA taken a position on the Bush administration's plan to increase the PBGC funding from $19 to $30 per year per employee? Or the proposal to require higher contributions from companies that are more underfunded?