American Airlines on Wednesday won court approval to eliminate lump-sum retirement payouts to pilots and proceed with plans to freeze their defined benefit plan.
U.S. Bankruptcy Court Judge Sean Lane in New York also approved the new labor contract with the Allied Pilots Association, which calls for the company to contribute 14% of pay into a new 401(k) plan.
The ruling denied a request from a group of senior pilots who wanted to preserve the lump-sum option.
As part of its negotiations with parent AMR Corp., the pilots' union supported removing the lump-sum option in order to avoid plan termination. The Pension Benefit Guaranty Corp. and the unsecured creditors committee also supported removing it.
“Since March, we've worked collaboratively with the Allied Pilots Association, the PBGC and the unsecured creditors' committee to develop a solution that would allow us to maintain the freeze of our pilot defined benefit pension plan, and we are pleased that we can now move forward to implement that solution,” American Airlines spokesman Bruce Hicks said in an e-mail.
Calls to attorneys representing the senior pilots group were not returned at press time.