The Pension Benefit Guaranty Corp. filed liens of $91 million
against some assets of American Airlines' parent company, which is
operating under bankruptcy court protection.
The U.S. government has signaled that it is ready to fight to
prevent American Airlines from using bankruptcy to shed its pension
While American has not said it intends to force the government to
take over its pension plans, Joshua Gotbaum, director of the Pension
Benefit Guaranty Corp., said Tuesday that he was hoping to get out
in front of any such move by the airline. The government agency is
already operating with a deficit of $23 billion and has said it
would bear an additional $9 billion loss if American terminated all
four of its employee plans, which cover 130,000 people.
Last month, American's parent company, AMR, said that it was
contributing $6.5 million to the pension plans, far short of the $97
million that it would need to contribute if it were outside
In a move to recover that shortfall, Mr. Gotbaum said Tuesday
that the agency had put liens on $91 million of American's assets,
beginning the process of foreclosure. Most of the assets are in
Latin America. They include aircraft, ticketing offices and real
estate and are not part of the bankruptcy.
American Airlines was set to meet with its employee unions in
Dallas on Wednesday to outline its new business plan, including the
concessions it is seeking. The unions fear that the business plan
may include job cuts and either a freeze or a termination of some or
all of its four defined-benefit pension plans. Each plan covers a
different group of workers.
The meeting is likely to bring about weeks of tense negotiations
between American and its main unions -- the Allied Pilots
Association, the Association of Professional Flight Attendants and
the Transport Workers Union, which represents the airline's ground
workers.A bankruptcy judge will eventually have to rule on the
company's restructuring plan and any alternatives proposed by the
unions or potential bidders for the airline.
Both the unions and the pension guaranty corporation are bracing
for a battle with clear political implications, since jobs and
benefits are likely to feature prominently this year in the
"Companies in bankruptcy often try to do things that they don't
need to do," Mr. Gotbaum said at a news conference, adding that he
believed American was preparing to argue that it could not emerge
from bankruptcy without shedding some of its pension obligations.
American, led by Tom Horton, who became its chief executive late
last year, reported Tuesday that it had lost $904 million in
December, on revenue of $2 billion. It did not provide year-earlier
comparisons in its filing to U.S. Bankruptcy Court for the Southern
District of New York. The company said that so far, it had paid $14
million in professional fees linked to its restructuring, including
fees to lawyers and investment bankers.
American told its employees in a letter on Jan. 23 that it was
putting less money than scheduled into their pension funds. Its head
of human resources, Jeff Brundage, said that the $6.5 million
covered the amount the company owed from Nov. 29, when it filed for
bankruptcy, to Dec. 31.
Any portion owed before the bankruptcy filing would be "dealt
with under the supervision of the court," Mr. Brundage wrote, "just
like unpaid bills from suppliers."
In previous bankruptcies in the Southern District of New York,
the court has permitted companies to treat a large part of their
pension contributions as prebankruptcy debt, which does not have to
be paid down during the bankruptcy proceedings.
When a defined-benefit pension plan is taken over by the
government, some retirees end up having benefits cut because of
limits on the government's pension insurance program. Mr. Gotbaum
said American employees would lose about $1 billion in benefits if
the plan failed. …