PBGC offers facts on AA

[AANOTOK]

PBGC Director Josh Gotbaum on the Importance of American Airlines’ Pension Plans

FOR IMMEDIATE RELEASE
January 12, 2012

WASHINGTON—Pension Benefit Guaranty Corporation Director Josh Gotbaum released the following statement today on the American Airlines' pension plans:

Some have suggested that American must duck its pension commitments and kill its pension plans in order to survive. We think that commitments to 130,000 workers and retirees shouldn't be disposable, that American should have to prove in court that this drastic step is necessary.

For other airlines, it hasn't been. American's competitors found ways to increase revenues and get competitive costs while honoring pension benefits. Delta maintained its non-pilots plan, and both Northwest and Continental kept their plans going after their bankruptcies.

Counsel for American claims that it needs to kill its employees' pensions in order to be competitive with other major carriers. The numbers tell a different story: Delta Airlines, which reorganized in bankruptcy, pays an average of $13,210 per employee in pension costs - almost 2/3 more than American's pre-bankruptcy cost of $8,102. (Source: 2010 annual reports)

American has more than $4 billion in cash; some of that money should already have been paid into its pension plans. However, Congress, hoping to preserve plans, allowed American to defer the payments. It would be a tragedy if American repaid Congress's generosity by turning around and killing the plans anyway.

PBGC is always ready to provide a safety net to employees whose companies can no longer afford their commitments, but that doesn't mean that it's good for employees and retirees when we do. There are legal limits to the amounts we can pay, and we don't cover retiree health care. That's why PBGC always tries first to preserve plans. We will continue to encourage American to fix its financial problems and still keep its pension plans.

We stand with American's workers and retirees who are concerned about their futures. Many of the airline's employees took lower wages so the plans could continue. Now, it's American's turn to step up so workers aren't short-changed.

 

[aapitbull]

PBGC Director Josh Gotbaum on the Importance of American Airlines’ Pension Plans

FOR IMMEDIATE RELEASE
January 12, 2012

WASHINGTON—Pension Benefit Guaranty Corporation Director Josh Gotbaum released the following statement today on the American Airlines' pension plans:

Some have suggested that American must duck its pension commitments and kill its pension plans in order to survive. We think that commitments to 130,000 workers and retirees shouldn't be disposable, that American should have to prove in court that this drastic step is necessary.

For other airlines, it hasn't been. American's competitors found ways to increase revenues and get competitive costs while honoring pension benefits. Delta maintained its non-pilots plan, and both Northwest and Continental kept their plans going after their bankruptcies.

Counsel for American claims that it needs to kill its employees' pensions in order to be competitive with other major carriers. The numbers tell a different story: Delta Airlines, which reorganized in bankruptcy, pays an average of $13,210 per employee in pension costs - almost 2/3 more than American's pre-bankruptcy cost of $8,102. (Source: 2010 annual reports)

American has more than $4 billion in cash; some of that money should already have been paid into its pension plans. However, Congress, hoping to preserve plans, allowed American to defer the payments. It would be a tragedy if American repaid Congress's generosity by turning around and killing the plans anyway.

PBGC is always ready to provide a safety net to employees whose companies can no longer afford their commitments, but that doesn't mean that it's good for employees and retirees when we do. There are legal limits to the amounts we can pay, and we don't cover retiree health care. That's why PBGC always tries first to preserve plans. We will continue to encourage American to fix its financial problems and still keep its pension plans.

We stand with American's workers and retirees who are concerned about their futures. Many of the airline's employees took lower wages so the plans could continue. Now, it's American's turn to step up so workers aren't short-changed.

Just another in a long line of clues that the sky is not falling like so many of the chicken littles on this sight claim. Lets see now they entered with their own dip financeing, the motion not to form a creditors committee now they have ask the NMB back to the table owe yea the TWU claiming all they want is 880 million a year in cost savings from all three groups together at the meeting yesterday in Dallas not to mention trying to exclude 2 of their banking giant friends from the BK proceeding or at least put them first in line??? We will see though maybe the end is near as soooo many of you claim.

 

[Frank Szabo]

More politically correct crap from a government outfit that's far overextended financially. Horton simply wants to better the airliine industry peers re: AA's financial condition and liabilities - this is a strategic bankruptcy, not one of necessity. We'll see what actually happens as the judge may well have the final say.

I wonder if AA's management ever considered running their business responsibly and doing just a little bit to make the employees happy. That would certainly have gone a long way in the past years but the choice was made to use force rather than consideration.

 

[Birdman]

Is the PBGC posturing themselves for a larger chunk of stock equity? They need assistance with their other obligations and what better way to get it than to milk the newbies.

 

[FWAAA]

I see a bureaucrat who acts as though it's his own personal fortune that has to bankroll the pension funding shortfall.

During the last decade, US, UA and DL terminated their pilot pensions. IIRC, US and UA terminated everyone else's pensions as well. All other pensions of DL and NW were frozen. CO froze their employee pensions years ago in its prior bankruptcies. And now Josh argues strenuously that AA should be the exception rather than the rule - that AA need not terminate its pilot pensions nor its other pensions. I predict that despite his public lobbying, Josh loses and finds all of the AA pensions dumped in his lap.

 

[aapitbull]

I see a bureaucrat who acts as though it's his own personal fortune that has to bankroll the pension funding shortfall.

During the last decade, US, UA and DL terminated their pilot pensions. IIRC, US and UA terminated everyone else's pensions as well. All other pensions of DL and NW were frozen. CO froze their employee pensions years ago in its prior bankruptcies. And now Josh argues strenuously that AA should be the exception rather than the rule - that AA need not terminate its pilot pensions nor its other pensions. I predict that despite his public lobbying, Josh loses and finds all of the AA pensions dumped in his lap.

This certainly the most likely outcome for the pensions to be sure!

 

[FWAAA]

Is the PBGC posturing themselves for a larger chunk of stock equity? They need assistance with their other obligations and what better way to get I than to milk the newbies.

Excellent observation. Their DL stock has languished - its value really hasn't held up since it merged with NW. No doubt it should get a billion or two worth of the new AMR stock if the pensions are terminated.

 

[eolesen]

Is the PBGC posturing themselves for a larger chunk of stock equity? They need assistance with their other obligations and what better way to get I than to milk the newbies.

You got it. PBGC is being a little more proactive than reactive as they were with bankruptcies past. Remains to be seen what good it will do them, though.

 

[Buck]

Could the TWU take over the pesion for the employees they represent?

 

[MCI transplant]

Could the TWU take over the pesion for the employees they represent?

<_< ------ The IAM has it's own pension fund. That's one option we had when TWA froze our pensions way back when. We could put part of our pay towards retirement. But! The membership didn't trust the Union, and voted it down! I don't know if the TWU does has one or not. And if they do, would you trust them with your money?

 

[Buck]

Please Read Docket # 618

 

[FWAAA]

Could the TWU take over the pesion for the employees they represent?

Suppose the pension fund for the TWU-represnted employees is underfunded by several hundred million or perhaps a billion dollars? From where would that money come if the TWU took over the pension? The NYC bus and subway drivers? WN FAs? Increase dues charged to AA employees represented by the TWU?

 

[tech2101]

I see a bureaucrat who acts as though it's his own personal fortune that has to bankroll the pension funding shortfall.

During the last decade, US, UA and DL terminated their pilot pensions. IIRC, US and UA terminated everyone else's pensions as well. All other pensions of DL and NW were frozen. CO froze their employee pensions years ago in its prior bankruptcies. And now Josh argues strenuously that AA should be the exception rather than the rule - that AA need not terminate its pilot pensions nor its other pensions. I predict that despite his public lobbying, Josh loses and finds all of the AA pensions dumped in his lap.

So the PBGC wanting American to honor its obligations is a bad thing?

 

[FWAAA]

So the PBGC wanting American to honor its obligations is a bad thing?

Not at all - I agree that companies should be forced to honor their pension promises made to their employees and retirees. In part, that's why I was such a vocal proponent of denying a distress termination to US and UA. I posted here in 2002-05 that those airlines should have been liquidated rather than abandon their pension obligations. A side benefit would have been industry-wide consolidation, something that everyone seems to agree is necessary now, and on which I was banging the drum 7-10 years ago. Liquidation of US and UA would have made things better for everyone at DL, NW, CO and AA.

But since US and UA and then DL were allowed to walk away from their pilot pension obligations (reducing pensions already earned, for active and retired pilots), the hypocrite in me says, "well, AA is entitled to the same treatment the others were granted, and trying to preserve the pensions for almost nine extra years shouldn't place AA at a disadvantage." If US, UA and DL could walk away from their promises, it takes a lot of chutzpah for Josh at PBGC to argue so loudly that AA shouldn't be granted the same relief as its competitors (if that's what AA wants).

About my focus on pilots: It's not that I don't care about other workgroups. AFAIK, generally only pilots had pensions sufficiently large as to be reduced by the PBGC maximum, made worse by the former retirement age of 60 (which made for an even lower PBGC maximum payout).

 

[BoeingBoy]

I think perhaps that the PBGC is more concerned about having to take on more $Billions in unfunded liability than they are the beneficiaries of AA's plans.

Jim