PBGC Files Liens on American Airlines

The Pension Benefit Guaranty Corporation (PBGC), the federal pension insurance agency, has filed a $91 million claim against American Airlines’ assets in a bid to put pressure on the airline to save its retirement plans rather than dump the obligation on the agency. On Tuesday, the agency said that it was forced to issue the filing when the carrier only paid, last week, $6.5 million of a required nearly $100 million contribution towards its pension plans.

The filing has escalated a row between American Airlines, whose parent company AMR Corporation filed for bankruptcy last November, and PBGC, whose director has accused the airline of pocketing pension relief money rather than put it towards staff’s retirements. AMR Corp and its chief bankruptcy lawyer have increased the possibility that the pensions plans covering about 130,000 staff and retirees could be frozen or terminated. The company’s intentions could be made more clear today, when it presents new contracts to unions.

The four traditional pension plans set up by American Airlines have assets worth about $8 billion and obligations estimated to be $18 billion by the pension agency. If the plans are terminated, the PBGC will take over the assets and pay benefits of up to $54,000 per year, per retiree. The company estimates that 10% of staff and retirees may see their promised benefits reduced.

The PBGC filed liens, which is the right to dispose of property, in Washington, D.C., Delaware and Texas. This means that the agency will get paid if AMR tries to sell assets that include real estate like ticket offices. This isn’t the first time that the agency has filed liens, but it doesn’t usually hold a conference call with journalists to announce the move.

PBGC Director Joshua Gotbaum says that he wants to see the company reorganise and become profitable, but this should be done without killing its staff’s pension plans. There are three reasons they have gone public with the move against American Airlines: the large amount of staff affected, AMR Corp has underfunded the plans even after getting pension relief in 2007 from Congress, and other carriers having reorganised without terminating pension plans.

The PBGC estimates that AMR Corp has saved about $1 billion due to Congress’ intervention. The airline company had $4 billion in cash when it filed for bankruptcy. Gotbaum says that $1 billion didn’t go into American Airlines’ pension plans, rather it’s 25% of their whole bankruptcy war chest.

Meanwhile, it’s been revealed to reporters that AMR Corp is planning to meet with the Transport Workers Union as soon as today to explain their plan for cuts as part of the bankruptcy reorganisation. One of the airline’s moves could be flying aircraft overseas for maintenance at lower-cost facilities, which is something most US carriers do already.

Local 514 maintenance chairman John Hewitt says that he is worried about his family, along with any other American Airlines worker. The worst case scenario would be moving jobs from Tulsa, but anything is possible with bankruptcy. Union spokesman Jamie Horwitz says that there are two major American-owned maintenance facilities – one in Tulsa with 6,500 members and one outside Dallas with 2,200 members.

However, the Transport Workers Union has announced a website (www.isupportamericanjobs.com) aimed to draw attention to the thousands of Tulsa-based staff who could lose their jobs and pensions due to the reorganisation of American Airlines. Visitors to the site can sign an online petition for workers to be treated fairly during the bankruptcy. Nearly 2,000 people have signed the petition as of Monday afternoon.