After Filing Bankruptcy American Airlines Wants to Terminate Its Pension Plans


This week, American Airlines who entered into bankruptcy filing back in November announced that it wanted to terminate its pension plans for its 130,000 employees. Since 2006, American Airlines has already saved $2.1 billion because of two congressional measures that allowed the ailing airline to reduce its contribution to the employee pension plans. Back at that time, the airline said it would make it up later. Now, after filing bankruptcy, AMR is asking the bankruptcy judge to terminate its four pension plans and have the federal government step in and bail them out to the tune of $9 billion. This bail out would amount to the largest ever.

Because of this recent move by American Airlines, labor unions, representing the employees are asking for a cash sum of $4 billion out of the bankruptcy filing. The employees unions have stated they have asked for the money since the company was filing bankruptcy back in November. They further stated there is no current proposal for any restructuring of debt to any financial institution.

Over the last six years, many of the carriers including American, have gone to Congress to ask for relief. Recently, the director of the PBGC, Josh Gotbaum said “In effect, the Congress of the United States and the employees of American Airlines provided half of the money to sustain American in bankruptcy.”

Back in 2006, Congress enacted the Pension Protection Act of 2006 allowing airlines to cut pension contributions for two years if necessary and make it up in the later years. Analysts believe that American Airlines prior to filing bankruptcy, was able to save $1.1 billion by not paying pension contributions. It will be interesting to see if the American taxpayer will end up footing the bill of this employee pension because of American Airlines filing for bankruptcy.

2 Responses to After Filing Bankruptcy American Airlines Wants to Terminate Its Pension Plans

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