American Airlines Requesting a Gov’t Bailout

American Airlines’ plan for pension bailout is drawing heavy criticism – for good reason

Steven Mufson
Wahington Post
February 4, 2012

American Airlines has saved $2.1 billion since 2006, thanks to two congressional measures that allowed it to reduce contributions to its pension plans. The company said it would make up any shortfall later.

Later has come, but there’s been a change in that plan.

American Airlines, whose parent company filed for bankruptcy in November, said this week that it wants to terminate its four pension plans for 130,000 workers and retirees and ask the federal government’s Pension Benefit Guarantee Corp. to bail out its unfunded pension obligations to the tune of $9 billion. It would be the largest PBGC bailout ever. Without the congressional relief, the gap would have been smaller, the PBGC said.

The move, which needs approval from a New York judge, has angered the PBGC and labor unions representing American Airlines workers, in part because the airline had $4 billion in cash when it filed for bankruptcy and because it hasn’t yet made any proposal for restructuring its massive debt to financial institutions.

“American and other carriers have repeatedly asked Congress to give them funding relief in the last six years. More than $2 billion was diverted from their pension funds to their bankruptcy war chest,” Josh Gotbaum, director of the PBGC, said Friday. “In effect, the Congress of the United States and the employees of American Airlines provided half of the money to sustain American in bankruptcy.”

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