Major changes are afoot for pilots and retirees at one of the world’s largest airlines as it continues to emerge from a November 29, 2011 Chapter 11 bankruptcy filing.
American Airlines and its parent company, AMR Corp., want to put the brakes on employer-paid health care and life insurance benefits for about 40,000 retirees. Company spokesman Bruce Hicks has described the move as “very similar” to a proposal for future retirees, who would be given access to medical coverage as long as they pick up the tab.
A lawsuit was filed last Friday in U.S. Bankruptcy Court in Manhattan against the Committee of Retired Employees to pursue the health and welfare benefit cuts as a sound cost-cutting measure. The company also says it reserves the right to alter its benefit plans and never promised retirees lifetime coverage.
Retirement savings plans for pilots are also on the chopping block, though the airline has offered to sweeten the pot in order to pursue a plan-design overhaul with significant long-term implications.
Last month, the airline proposed freezing its defined benefit plan and terminating its money purchase defined contribution plan for pilots after already freezing three pensions for other union workers. As concessions, it would contribute 14% of pay into a 401(k) plan and give pilots a 13.5% equity stake in the company that’s expected to give the group more influence over a key corporate committee. The pilots will vote on this plan between July 25 and August 8.
AMR, which also owns regional airline American Eagle, provides benefits to retirees who were once pilots, flight attendants and ground workers. The group also includes nonunion retirees and those who worked for Trans World Airlines Inc., which was acquired in April 2001. The company, which has lost more than $10 billion since that acquisition, hopes to save more than $1 billion a year by slashing labor costs and increasing productivity.
