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Jerry Geisel

Different pension histories come together with airline merger

December 10, 2013 - 10:19am

American Airlines US Airways Merger


The merger of American Airlines Inc. and US Airways Group Inc., which was legally closed Monday with the two airlines becoming American Airlines Group Inc., bring together two companies with very different pension histories.

In 2003 and 2005, the Pension Benefit Guaranty Corp. took over a total of four US Airways' pension plans with nearly 56,000 participants following bankruptcy filings by the airline. The plans' terminations resulted in a PBGC loss of $2.75 billion, the agency's third biggest loss ever.

In 2012, the PBGC faced what would have been its biggest loss ever when American Airlines, whose parent, AMR Corp., had earlier filed for Chapter 11 bankruptcy, said it intended to terminate its four pension plans. That would have shifted to the PBGC the liability to pay about $8.7 billion in promised but unfunded benefits.

If the plans had been terminated, that $8.7 billion loss would have eclipsed the PBGC's previous biggest loss: $7.3 billion from its 2005 takeover of four United Airlines pension plans.

But, under strong pressure from the PBGC, American reversed course and agreed to freeze the plans, which have about 130,000 participants, on Nov. 1, 2012.