AA and the PBGC

[700UW]

The pensions at US arent frozen, they are terminated, frozen pensions dont get turned over to the PBGC.

 

[usa1]

Sorry ..... terminated.

 

[1AA]

The pensions at US arent frozen, they are terminated, frozen pensions dont get turned over to the PBGC.

YES they can at a later date. Watch USAIr do it if they manage to buy AA. It is part of USAir's mode of operation. AA's frozen pensions are still underfunded at some point some one has to fund them. This costs money both to manage and fund them.
They still have to be funded if AA employees start drawing from them. Dump it to the PBGC and it is now someone else's problem.

 

[700UW]

Once again, I lived it, a frozen pension does not get turned over to the PBGC, only pensions that are distressed terminated, and AA, the unions and the PBGC made an agreement that AA didnt terminate the pensions.

Yes they would have to go back into bankruptcy in order to terminate the pension, or the unions would have to agree to it.

I guess you dont understand a frozen pension.

A retirement plan to which no new contributions are being made. Previous contributions remain in employee accounts until distribution. A frozen plan must be maintained as long as funds remain.

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Read more: http://www.investorwords.com/5585/frozen_plan.html#ixzz2HIo2KGwf[/background]​

 

[usa1]

The PBGC has been active in the AA bankruptcy proceedings all along. They (PBGC) saved $9 billion by encouraging American to freeze rather than terminate all four of their plans, which covered 130,000 people. I think that was good for AA employees? A 30 year AA employee should be way better off than a 30 year US Air employee with that deal .... I just hope US employees can tap into their PBGC at 55 and keep working a few more years, so we can beef up our 401k's ..... that way we might be able to retire some day?

 

[WorldTraveler]

it is almost impossible to terminate a pension plan outside of BK and even in BK the PBGC will fight to get a very large stake in the company in exchange for allowing a cmopany to terminate the plans.

The chances of US/AA terminating AA's plans outside of BK are very slim... and if AA/US goes back into BK, the pensions are going to be pretty far down the list of concerns of AA/US employees.

However, AA will have about $10B in additional pension obligations on its books than what it planned for when it entered BK and I have yet to hear of a plan to reduce debt in other areas to service that increased debt.
And that debt will follow AA whether they remain independent or merge.

 

[700UW]

What do you mean you havent heard?

The AA and the UCC hasnt informed you?

How can that be?

(Sarcasm noted)

 

[WorldTraveler]

as if they have some secret plan to come up w/ $10B that no one else could have figured out.

Really?

$10B is more than 1/4 of the combined annual revenues of the combined company. Do you honestly think that is a rounding error or something that someone with even half a brain can't reasonably ask where they are going to get the money to pay?

The reason why the investors aren't asking is because they are going to get their money regardless and it will be the employees who are spoon fed only as much information as is necessary to get the deal approved will be the ones that come up short.

Take the blinders off.

No sarcasm. Nada.

 

[1AA]

Once again, I lived it, a frozen pension does not get turned over to the PBGC, only pensions that are distressed terminated, and AA, the unions and the PBGC made an agreement that AA didnt terminate the pensions.

Yes they would have to go back into bankruptcy in order to terminate the pension, or the unions would have to agree to it.

I guess you dont understand a frozen pension.

Agreement? AA made agreements with its unions in 03 NOT to touch our pensions if we accepted concessions in order to avoid BK. They also agreed to early openers and we would recover our loses or most of them that we gave them in 03. Then what happens? We end up here talking about it ten years later. Agreements, rules and laws change over time. I know if USAir can dump the frozen pensions they will find a way. You can not convince me or most AA employees that have been around for many years.

 

[700UW]

Guess you havent read the law that AA and others got passed several years back that extended the timeline on pension funding.

And no details of the POR has been released to the public, so just because your arent in the know, doesnt mean that their isnt a plan on how to address the pension or any other issue.

 

[700UW]

1AA,

Educate yourself.

http://www.pbgc.gov/about/pg/other/how-pension-plans-end.html

 

[WorldTraveler]

$10B overall or more than $500M in additional revenue per year is not something that doesn't get addressed.

The sole reason why the numbers haven't and won't be addressed in any POR for AA or in a merger agreement is because the AMR creditors and the AA/US stockholders will have long since cashed out before AA/US has to pay for the pension obligations it will be carrying - precisely because of the pension funding legislation that was granted to airlines.

AA entered BK with plans to order 450 or more new jets and dump its pensions and are still moving forward w/ more than half of those orders on a confirmed basis even though they are now retaining pension obligations worth half as much as all those new airplanes.

It is no more out of line to ask where the money to pay for all these debts is going to come from than it is to ask how the goverment is going to meet social security, health care, defense, environmental obligations etc.....

the only difference - and it is a very big one - is the US government can print money. AA and US alone or together cannot.

 

[usa1]

DOJ has to approve the merger, right? For competitive reasons won't the government want to see a pretty level playing field between AA, UA &DL as far as pension liabilities go. Anyone have comparative numbers for those three? If AA terminates their frozen plans in another BK round it would give them an advantage over airlines that only froze theirs.

Delta froze and United terminated right?

 

[WorldTraveler]

the DOJ could care less about pension liabilities. Even today, DL has higher pension liabilities than UA and that didn't enter the UA discussions ONCE.

DL has about $10 billion in pension liabilities as well... DL and AA would be about the same. DL is larger now but the pmDL pilot plan was terminated while AA will freeze all pensions.

The DOJ cares about ensuring competition... and there is little reason to believe that AA/US will either hurt or help competition in the US. All that will happen is that AA/US' larger size will threaten other competitors to increase their attacks on AA/US as they attempt to negate the effects of the merger.

Other carriers can increase their very legal attacks on AA and US regardless of whether they merge.

Costs of all kinds - pensions included - are not part of government concerns regarding mergers.

 

[usa1]

Expenses, including pensions effect how you can compete .... so you're saying United has a big advantage over the other two by terminating theirs while AA and DL only froze.

US Air terminated theirs, so isn't that a small plus for Parker case.