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American-US Airways merger brings together different pension plan histories

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The proposed merger of American Airlines Inc. and US Airways Group Inc. will bring together two airlines with two very different pension plan stories.

Between 2003 and 2005, after US Airways filed for bankruptcy, the Pension Benefit Guaranty Corp. took over four of the airline's pension plans, saddling the agency with about a $2.8 billion loss.

In early 2012, after American Airlines parent company AMR Corp.'s November 2011 Chapter 11 bankruptcy filing, American said it intended to terminate its four massively underfunded pension plans.

At the time, the PBGC which would have taken over the obligations, estimated the plans had about $8.3 billion in assets and about $18.5 billion in promised benefits. If they had folded, the PBGC would have been liable for about $17 billion in promised but unfunded benefits, resulting in an $8.7 billion loss to the agency, which would have been the PBGC's biggest loss in its history. The PBGC's biggest loss was its 2005 takeover of four United Airlines plans, which cost the agency about $7.3 billion.

But amid strong pressure from the PBGC, American reversed course in March and agreed to freeze the plans, effective Nov. 1, 2012.

The PBGC currently estimates that the four plans, which have about 130,000 participants, are 42% funded with liabilities of $21.3 billion and $8.86 billion in assets.

American said it expects the merger to be completed during the third quarter of 2013. The merger airline would be named American Airlines, American said Thursday in announcing the merger.