TWU Wins Freeze of Pension Plans at American Airlines

 - March 7, 2012, 12:50 PM
TWU workers at American Airlines appear closer to keeping their pensions once the airline emerges from bankruptcy. (Photo: American Airlines)

Bankrupt AMR Corp. has agreed to freeze the pension plan in place for members of the Transport Workers Union (TWU) rather than shift the burden to the U.S. government’s Pension Benefit Guaranty Corporation (PBGC), the TWU announced in a statement issued Wednesday. The parent company of American Airlines had originally proposed terminating the pensions of all 130,000 of its employees, but, according to the TWU, AMR has reversed its position and agreed to drop its demand for another $600 to $800 million in concessions, which the company said it would need to cover the cost of the pension-plan freeze. The TWU represents mainly maintenance and fleet service workers at American and its regional subsidiary, American Eagle.

“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 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.

“We would have preferred to keep the existing defined benefit plan in place,” added Little, “but that simply was not possible…We’re still discussing how to handle retirement savings going forward, as well as a wide range of other issues.”

The freeze will not take effect until AMR and the TWU reach a final overall settlement, but Little called the victory an “important stop forward.”

AMR faced stiff resistance to terminate the plan not only from its employees but also from the PBGC, which faced incurring a $10 billion deficit if it had to absorb the burden and “strongly” objected as well. PBGC director Josh Gotbaum asserted that AMR had not proved that it needed to terminate its plan, citing other airlines that emerged from bankruptcy without doing so.

In fact, Northwest and Continental Airlines emerged from bankruptcy with all their pension plans in place, said the PBGC. Delta kept two of its three pension plans, it added, terminating only its pilots’ pensions.

“The PBGC and Mr. Gotbaum acted responsibly, by not letting this company shift its liabilities onto all the other workers whose pensions are backed by the agency,” said Little.  “A pension freeze is a much better outcome.”