A group of senior pilots at American Airlines on Monday asked the judge overseeing parent AMR Corp's Chapter 11 bankruptcy case to withhold approval of a new labor agreement that would eliminate the option of lump-sum retirement payouts.
The group of 131 active senior pilots on Dec. 12 filed objections to the new pilots' contract, arguing that removing the lump-sum option “is not necessary to avoid a termination of the plan,” and on Monday filed another objection to deny approval of the entire contract.
On Dec. 14, the Pension Benefit Guaranty Corp. and the unsecured creditors committee agreed in court filings that removing lump-sum payments was necessary to avoid a termination. American had already agreed to freeze three of four defined benefit plans for flight attendants, mechanics and ground crew.
Members of the Allied Pilots Association on Dec. 7 agreed by a 74% majority to accept a new contract that includes freezing the pilots' defined benefit plan and instead having the company contribute 14% of pay into a new 401(k) plan. The contract does not allow for lump-sum payments.
The pilots' union, which represents 8,000 active American pilots, supported AMR's successful bid to change IRS rules allowing the company to remove the lump-sum option from its DB plan.
While the lump-sum option was a popular choice for retiring pilots, “we lobbied actively for (removing it) so the defined benefit plan could be frozen and not terminated. We made the decision that was in the best interest of the most numbers,” said APA director of communications Gregg Overman in an interview.
AMR officials sought to remove the lump-sum option to avoid a mass exodus of senior pilots when the company emerged from bankruptcy. The senior pilots argued in their objection that their numbers were too small to cause a plan termination, and that removing the lump-sum option “can only be viewed as punitive.”
U.S. Bankruptcy Court Judge Sean Lane is scheduled to consider the motions and the new labor agreement at a hearing in New York on Wednesday.
American's four pension plans have $8.3 billion in assets and $18.5 billion in liabilities, both as of Dec. 31, according to AMR's latest 10-K filing. DC assets totaled $9.4 billion, as of Sept. 30, 2011, according to Pensions & Investments data, the most recent available.
Attorney Stanley Silverstone, who represents the group of senior pilots, referred calls to Larry Scerba, a pilot who also filed a labor grievance on the group's behalf. Mr. Scerba did not return calls at press time.