AMR Retirees Ask to Participate in Bankruptcy Case

January 27, 2012 ( - A group of non-union AMR retirees asked a federal bankruptcy judge to let them participate in the bankruptcy case of AMR, American Airlines and other AMR subsidiaries.

The retirees have formed an organization, the AMR Retirees Pension Protection Corp., “for the purpose of protecting the retiree benefits and pension benefits” they earned while working for the businesses, according to the Dallas Morning News. In a filing, the group asked U.S. Bankruptcy Judge Sean Lane to appoint a retiree committee “to act as the authorized representative of non-union retirees” in the case.  

The Pension Benefit Guaranty Corporation (PBGC) this week pushed back on what it says are misleading statements to American Airlines employees by its management about their pension plans. American’s recent statements, through its lead bankruptcy counsel and in employee communications, have signaled the airline’s intent to dump its retirement obligations on the PBGC, the agency claims. “American said nothing’s been decided yet, but didn’t even bother to pretend that it was trying to preserve its employees’ pensions,” said J. Jioni Palmer, PBGC’s director of communications.  

Last week it was reported that AMR made only a small fraction of the roughly $100 million payment it was scheduled to contribute to the company’s employee pension plans (seeAmerican Airlines Makes Reduced Pension Payment).  

A recent letter to employees from management downplayed the serious consequences of what could happen if the company terminated its pension plans, Palmer said. The letter ignored that PBGC doesn’t insure retiree health benefits, which are usually canceled when companies terminate pension plans.

American also downplayed the pension cuts that would occur if American's plans are terminated and PBGC benefits are substituted. The agency has said, based on its estimates, American Airlines employees could lose a billion dollars in pension benefits if American terminates its plans (see PBGC: American Airlines Bankruptcy Could Hurt Financial Position).  

In their filing, the retirees indicated they don't like the signs they're getting from their former employer. "Although the Debtor has not yet made any formal application to this Court to terminate or modify retiree benefits in these cases, the Debtors' filings leave little doubt that such efforts will be undertaken in these cases," the filing said, according to the Dallas Morning News.  

"Accordingly, it is respectfully submitted that the formation of a Retiree Committee is appropriate now so that Retirees are properly in a position to protect their interests and are not forced to scramble to catch up if the Debtors file a motion to modify or terminate retiree benefits," the group stated.  

The news report said Allied Pilots Association told its retirees that the interests of working pilots and retirees may conflict and that the APA will not represent retired pilots. In contrast, the Transport Workers Union (TWU) has assured its retirees that the TWU will represent retirees and current employees alike.