WASHINGTON -(Dow Jones)- Senate Minority Whip Trent Lott, R-Miss., and Sen. Johnny Isakson, R-Ga., said Tuesday they are considering ways to repeal a pension funding break for AMR Corp.'s (AMR) American Airlines, inserted last month into a must-pass wartime spending bill.
That bill was signed into law May 26 and allows American Airlines, rival Continental Airlines Inc. (CAL) and some regional carriers to assume an 8.25% rate of return on pension assets when calculating pension underfunding.
Ever since Congress agreed last summer to allow airlines that have frozen their pension plans to use a more optimistic interest rate in calculating their pension obligations, American and Continental have been pushing allies in Congress to allow them to use similar assumptions for their ongoing pension plans.
Under the bill signed into law last month, American and Continental will be allowed to assume an 8.25% rate of return on their assets for ongoing pension plans. That's less than the 8.85% rate allowed airlines with frozen pension plans, including Northwest Airlines Corp. (NWA) and Delta Air Lines Inc. (DAL), but still about 2 percentage points higher than they would be required to assume under prior law.
"This is very, very bad," Lott said. "There is going to be substantial cost involved."
American Airlines' pension obligations are underfunded by roughly $2.4 billion according to the company's 2006 annual report. Lott and other opponents of the provision argue that it will allow American to avoid making pension fund contributions even as its pension obligations increase.
American and its allies in Congress have argued that it simply wants even footing with competitors Northwest and Delta, who under the 2006 Act can use the 8.85% rate in calculating their pension obligations.
"All we are asking is to be treated similarly," said Mary Frances Fagan, director of corporate communications for American, when discussing the airline's lobbying efforts in February.
Northwest and Delta in turn argue that they won the interest rate reprieve because their pension plans are frozen to new benefits and new beneficiaries.
"I don't think this issue is over," Isakson said Tuesday.
Isakson was in the thick of negotiations last year over what pension funding breaks to grant airlines as part of a broader overhaul of the nation's pension funding rules.
Isakson had promised at the time to work with American and Continental to address their concerns this year, so he said he was surprised to see the provision inserted into an unrelated spending bill without his knowledge.
Isakson and Lott plan to write the Pension Benefit Guaranty Corporation for a formal estimate of how much additional exposure the provision will create for the federal corporation.
PBGC is a federal corporation which guarantees pension benefits for defined benefit plans, including those offered by American, Continental, Delta, and Northwest.
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Guess they shouldn't have been so "in your face" with the bonuses, it made it look like they had more money than they needed and perhaps don't need the pension breaks after all.
Wierder things have happened!
That bill was signed into law May 26 and allows American Airlines, rival Continental Airlines Inc. (CAL) and some regional carriers to assume an 8.25% rate of return on pension assets when calculating pension underfunding.
Ever since Congress agreed last summer to allow airlines that have frozen their pension plans to use a more optimistic interest rate in calculating their pension obligations, American and Continental have been pushing allies in Congress to allow them to use similar assumptions for their ongoing pension plans.
Under the bill signed into law last month, American and Continental will be allowed to assume an 8.25% rate of return on their assets for ongoing pension plans. That's less than the 8.85% rate allowed airlines with frozen pension plans, including Northwest Airlines Corp. (NWA) and Delta Air Lines Inc. (DAL), but still about 2 percentage points higher than they would be required to assume under prior law.
"This is very, very bad," Lott said. "There is going to be substantial cost involved."
American Airlines' pension obligations are underfunded by roughly $2.4 billion according to the company's 2006 annual report. Lott and other opponents of the provision argue that it will allow American to avoid making pension fund contributions even as its pension obligations increase.
American and its allies in Congress have argued that it simply wants even footing with competitors Northwest and Delta, who under the 2006 Act can use the 8.85% rate in calculating their pension obligations.
"All we are asking is to be treated similarly," said Mary Frances Fagan, director of corporate communications for American, when discussing the airline's lobbying efforts in February.
Northwest and Delta in turn argue that they won the interest rate reprieve because their pension plans are frozen to new benefits and new beneficiaries.
"I don't think this issue is over," Isakson said Tuesday.
Isakson was in the thick of negotiations last year over what pension funding breaks to grant airlines as part of a broader overhaul of the nation's pension funding rules.
Isakson had promised at the time to work with American and Continental to address their concerns this year, so he said he was surprised to see the provision inserted into an unrelated spending bill without his knowledge.
Isakson and Lott plan to write the Pension Benefit Guaranty Corporation for a formal estimate of how much additional exposure the provision will create for the federal corporation.
PBGC is a federal corporation which guarantees pension benefits for defined benefit plans, including those offered by American, Continental, Delta, and Northwest.
******************* **************************
Guess they shouldn't have been so "in your face" with the bonuses, it made it look like they had more money than they needed and perhaps don't need the pension breaks after all.
Wierder things have happened!
