PBGC Chief Urges American Airlines to Maintain Pensions

Delta, Northwest, and Continental kept their pension plans going after their bankruptcies, and so should American Airlines, Pension Benefit Guaranty Corporation Director Josh Gotbaum said in a Jan. 12 statement.

Josh Gotbaum, director of the federal Pension Benefit Guaranty Corporation, issued a statement Jan.12 about the American Airlines pension plans as the airline's Chapter 11 reorganization proceeds. "Some have suggested that American must duck its pension commitments and kill its pension plans in order to survive. We think that commitments to 130,000 workers and retirees shouldn't be disposable, that American should have to prove in court that this drastic step is necessary," Gotbaum said.

"For other airlines, it hasn't been. American's competitors found ways to increase revenues and get competitive costs while honoring pension benefits. Delta maintained its non-pilots plan, and both Northwest and Continental kept their plans going after their bankruptcies. Counsel for American claims that it needs to kill its employees' pensions in order to be competitive with other major carriers. The numbers tell a different story: Delta Airlines, which reorganized in bankruptcy, pays an average of $13,210 per employee in pension costs -- almost two-thirds more than American's pre-bankruptcy cost of $8,102." His statement said the source for those figures was 2010 annual reports.

"American has more than $4 billion in cash; some of that money should already have been paid into its pension plans," Gotbaum's statement continued. "However, Congress, hoping to preserve plans, allowed American to defer the payments. It would be a tragedy if American repaid Congress's generosity by turning around and killing the plans anyway. PBGC is always ready to provide a safety net to employees whose companies can no longer afford their commitments, but that doesn't mean that it's good for employees and retirees when we do. There are legal limits to the amounts we can pay, and we don't cover retiree health care. That's why PBGC always tries first to preserve plans. We will continue to encourage American to fix its financial problems and still keep its pension plans.

"We stand with American's workers and retirees who are concerned about their futures. Many of the airline's employees took lower wages so the plans could continue. Now, it's American's turn to step up so workers aren't short-changed."

PBGC currently protects the pension benefits of 44 million Americans in 27,500 private-sector pension plans.

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