American Airlines parent AMR Corp, and the PBGC reached agreement on freezing three of the airline’s four defined benefit plans, and working toward freezing the pilots’ pension plan.
The agreement, filed with U.S. Bankruptcy Court in New York on May 4, “was an affirmation of what we had already committed to do,” said American spokesman Bruce Hicks.
The agreement removes PBGC’s threat of litigation as long as the pension plan freezes do not unravel as the airline addresses other parts of its collective bargaining agreements.
According to the Pension Benefit Guaranty Corp., America’s four defined benefit plans have assets of $8.3 billion and liabilities of $18.5 billion, and officials at the agency, which sits on the airline’s creditors committee, have pressed American to avoid terminating the plans.
When American filed for Chapter 11 bankruptcy protection on Nov. 29, it announced that it would seek to terminate all four pension plans. On March 7, it said it would freeze, not terminate, pension plans for flight attendants, ground crews, and non-union employees.
The pilots plan presents a more expensive challenge for American, which would like to remove the option of lump-sum payments before agreeing to a freeze.