AMR Agrees To Freeze TWU Pensions, Tulsa Mechanics Included

American Airlines' parent company, AMR, has agreed to freeze current pension plans for members of the Transport Workers Union.

Wednesday, March 7th 2012, 12:13 pm

By: Richard Clark


American Airlines' parent company, AMR, has agreed to freeze current pension plans for members of the Transport Workers Union.

The agreement is a major development in the bankruptcy of AMR.  The company had announced its plan to terminate pension plans for all employees, and transferring liabilities to the U.S. Pension Benefit Guaranty Corporation (PBGC).  According to the TWU, that would have resulted in a $10 billion deficit for the government agency. 

"The company initially wanted to terminate our pension plan, shift the cost to the government, and put our members at risk," said TWU International President James C. Little. "Our negotiating team drew a line in the sand and said this was totally unacceptable – and today we are pleased to report that AMR has informed us they are willing to accept our proposal for a freeze of the current pension plan."

Read letter from AMR Senior Vice President Jeff Brundage to employees.

According to a statement from the union, AMR also agreed to drop its demand for an additional $600 to $800 million in concessions, which the company claimed was the cost of a pension plan freeze.

"We would have preferred to keep the existing defined benefit plan in place," said Little, "but that simply was not possible.  We're still discussing how to handle retirement savings going forward, as well as a very wide range of other issues," said Little. "We are not out of the woods, and we can't implement the pension plan freeze until we reach an overall agreement. But this is a very important step forward."

2/8/2012:  Related Story:  Support Grows For Petition To Keep American Airlines Jobs In Tulsa

AMR is moving forward with plans to cut 13,000 jobs company-wide, including 2,100 here in Tulsa.

Pension Benefit Guaranty Corporation Director Josh Gotbaum released the following statement today on AMR's employee letter on pension plans:

"It is great progress and good news that American recognizes it can reorganize successfully and preserve its employees' pension plans. We're also glad the company is willing to work with us to preserve their pilot plan too."

"Bankruptcy forces tough choices, but that doesn't mean pensions must be sacrificed for companies to succeed. We will continue to work with American and the other participants in the bankruptcy to ensure that success."

On its web site PBGC says other companies have successfully reorganized without ending their pensions.  It points out that Northwest and Continental went through bankruptcy and emerged with all their pension plans intact.  It says Delta kept two of its three pension plans, terminating only its pilots' pensions.

The PBGC goes on to say AMR's pension costs are lower than some of its major competitors, because of allowances it's already received.  "Delta has pension costs almost 2/3 higher than AMR's pre-bankruptcy cost; in 2010 Delta paid about $13,200 per employee, compared to $8,100 for AMR. Yet Delta posted earnings last year of $854 million, while American lost money.

According to the PBGC, it protects the pension benefits of 44 million Americans in 27,500 private-sector pension plans. The agency is directly responsible for paying the benefits of more than 1.5 million people in failed pension plans. PBGC receives no taxpayer dollars and never has.  Its operations are financed by insurance premiums and with assets and recoveries from failed plans.

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