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EULESS, Texas—The union representing American Airlines Inc.'s flight attendants is urging the financially distressed airline to retain pension plan coverage for current attendants.
“American Airlines flight attendants have earned their pensions, and we have sacrificed wages and other benefits in exchange for them,” Laura Glading, president of the Assn. of Professional Flight Attendants, which represents 16,000 American Airlines flight attendants, said Thursday in a statement.
With an average age of 51, the impact of a pension plan termination or freeze on the airline's flight attendants would be “particularly devastating,” the Euless, Texas-based association said.
“Employees nearing retirement would have little opportunity to save the additional amount necessary to make up for the loss of their pension benefits,” AFPA said.
American, whose parent company, Forth Worth, Texas-based AMR Corp., filed for Chapter 11 bankruptcy reorganization in late November, has not said whether it intends to terminate or freeze its pension plan covering flight attendants or its three other pension plans.
However, an American Airlines spokesman last month said the airline's pension plans are “very expensive” and that it spends more on them than competitors spend on their retirement plans. “Given American's plans to reduce its costs to a more reasonable level in line with industry norms, these costs and many other factors are considerations when deciding whether to continue the pension plans,” the spokesman said.
None of American's key competitors offer ongoing defined benefit plans. In 2005, the Pension Benefit Guaranty Corp. took over four United Airlines pension plans, incurring a $7.35 billion loss.
Aside from United, the PBGC in 2003 and 2005 took over three US Airways Inc. pension plans, incurring a $2.75 billion loss. Then, in 2006, the PBGC took over a Delta Air Lines Inc. plan covering the airline's pilots at a cost of $1.72 billion. Those terminations occurred in the wake of bankruptcy filings by the two airlines.
In addition, Delta sponsors a frozen plan in which participants do not accrue new benefits for nonpilot employees and retirees, as well as three frozen plans covering Northwest Airlines Inc. employees and retirees, which Delta acquired in 2008.
Other major American competitors, including Southwest Airlines Co. and JetBlue Airways Corp., do not sponsor defined benefit pension plans.
If American were to terminate the plans, which have about 130,000 participants, the PBGC could be hit with its biggest-ever loss.
According to preliminary PBGC estimates, the four plans have about $8.3 billion in assets and about $18.5 billion in promised benefits for nearly 130,000 participants.
The PBGC said if the plans were to fold, the agency would be liable for about $17 billion in benefits, resulting in an $8.7 billion loss to the agency. In its 2010 10-K report—the most recent available—American said it had about $7.8 billion in assets and a projected benefit obligation of about $13.5 billion.
In a statement Thursday, PBGC Director Joshua Gotbaum said the agency will continue to encourage American to fix its financial problems and keep its pension plans.