AA ..............CA$H ON HAND ?

[eolesen]

I don't think it's a matter of not caring what people like Bob want.

I think it's more a matter of balancing priorities and knowing how the underlying investments are performing. Don't forget that the rates of return used under federal law to calculate future asset values and the actual rates of return aren't always the same.

Bob wants his pension funded at all times. So do I.

Give me one example where a current retiree's check bounced. The fact is that they're not bouncing, and there's no risk of the plan running out of money now or anytime in the near future.

When the plan no longer has enough assets to pay the current obligations to its retirees, AMR will have no choice but to either borrow money or terminate the plan and hand it over to the PBGC.

Again, that's not the case now, and it's not going to be the case anytime soon.

 

[star power]

I don't think it's a matter of not caring what people like Bob want.

I think it's more a matter of balancing priorities and knowing how the underlying investments are performing. Don't forget that the rates of return used under federal law to calculate future asset values and the actual rates of return aren't always the same.

Bob wants his pension funded at all times. So do I.

Give me one example where a current retiree's check bounced. The fact is that they're not bouncing, and there's no risk of the plan running out of money now or anytime in the near future.

When the plan no longer has enough assets to pay the current obligations to its retirees, AMR will have no choice but to either borrow money or terminate the plan and hand it over to the PBGC.

Again, that's not the case now, and it's not going to be the case anytime soon.

Well I guest we should of waited unitl the fed chief spoke about SS, something like we should of started 10 year ago. I guest the PBGC will be around in the next 20 to 40 yrs, not, unless a taxpayer bailout.

Most airlines will be defunct do to fuel cost in the next 20 to 40 yrs. The crystal ball shows.

 

[Bob Owens]

Bob, you make it sound like current AA retirees aren't getting their pensions, which couldn't be further from the truth...

Once again you are hearing things in order to set the stage for a point that you want to make.

If 85% funded is what the company is stating, AA has been closing the gap by about 5% per year between cash contributions and interest growth on the underlying securities. By PBGC standards, it's overfunded, and if the plans were turned over, it's more likely than not that AA retirees would be receiving what they were promised, and not just the minimum guarantee (something DAL, UAL, U, and NWAC retirees will not be able to claim).

Could you cite the PBGC standards that would support your claim that instead of being 15% underfunded its overfunded?

Why would AA claim that they are only 85% funded if the PBCG considers them to be overfunded?

What would be the downside for workers with an overfunded pension?

As someone who is not yet retired what would the impact be to my pension if AA turned it over to the PBGC at 85% funded vs 100% funded? That is 100% based on AAs much higher standard that is.

 

[Redbone]

In the meantime AAs workers are going bankrupt.

I see a remarkable turn of face here among the management pundits here.

I said all along that AA wasnt in as bad a shape as they let on.

I was right.

I said that AAs $20 billion in debt was not a problem, and used the analogy of homeowner mortgage debt to illustrate that the debt load AA had was not much worse than what most homeowners start off with. Now FM is trying to spin the same analogy.

Corporations are not human,they are immortal, and only die from mismanagement so they can carry debt forever, in fact if they dont have any debt people would think that the company lacks initiative. Banks would not be happy if corporations did not have debt because if corporations did not borrow from the banks the banks wouldnt make money. In fact corporations often carry debt even if they dont need it because it is a way of redistributing wealth and keeping the bankers happy.If the earnings of the company are paid to the banks in the form of interest the workers cant demand a piece of it.

So for once FWAAA, FM and I are all in agreement, AMR is doing well. The problem is that it came out of our hides not theirs.

Neither was NWA (as ALL employees knew):
PROJECTED 2007 AIRLINE EARNINGS For top 10 airlines

Estimated

2006 $1.4-$1.7 billion



2007 $5.9 billion

BREAKDOWN AIRLINE PROFIT MARGIN

$1.2 billion Northwest 9.3%

$718 million Southwest 7.3

$1.3 billion American 5.7

$593 million US Airways 5.0

$172 million Alaska 4.9

$604 million Continental 4.6

$101 million JetBlue 3.6

$584 million Delta 3.2

$605 million* United 3.1

$66 million AirTran 3.1



Avg. oil price

Per barrel

2006 $66.25

2007 Hypothetical $55



*Consensus estimates

Sources: AirlineForecasts, Bloomberg

Chicago Tribune

 

[eolesen]

By PBGC standards I mean paying out only the max PBGC insured value, which for 2007 is $49,500 for someone who retired at 65, instead of the true value as defined by AA.

If the PBGC (and/or taxpayers) doesn't have to make up the shortfall, it's underfunded from an employee perspective, but funded enough to pay out the max guarantee.

What would be the downside for workers with an overfunded pension?

To the workers, none that I can think of. They're certainly not going to get bonus payments from it, though.

The downside of overfunding is entirely with the company. Once money goes into the trust, it can't come out until the last benficiary covered by the plan dies, and can't be used to pay payroll or bills.

As someone who is not yet retired what would the impact be to my pension if AA turned it over to the PBGC at 85% funded vs 100% funded? That is 100% based on AAs much higher standard that is.

It's a lot like Social Security, and depends entirely on what age you start taking payments:

PBGC Maximum Monthly Guarantees for Plans Terminating in 2007

Age 2007	Straight-Life	 Joint and 50%  
			Annuity 2007	  Survivor Annuity 
65		  $4,125.00		 $3,712.50 
64		  $3,836.25		 $3,452.63 
63		  $3,547.50		 $3,192.75 
62		  $3,258.75		 $2,932.88 
61		  $2,970.00		 $2,673.00 
60		  $2,681.25		 $2,413.13 
59		  $2,516.25		 $2,264.63 
58		  $2,351.25		 $2,116.13 
57		  $2,186.25		 $1,967.63 
56		  $2,021.25		 $1,819.13 
55		  $1,856.25		 $1,670.63 
54		  $1,773.75		 $1,596.38 
53		  $1,691.25		 $1,522.13 
52		  $1,608.75		 $1,447.88 
51		  $1,526.25		 $1,373.63 
50		  $1,443.75		 $1,299.38 
49		  $1,361.25		 $1,225.13 
48		  $1,278.75		 $1,150.88 
47		  $1,196.25		 $1,076.63 
46		  $1,113.75		 $1,002.38 
45		  $1,031.25		 $928.13

Since AA allows full retirement at 60 or 62 vs. 65, you're looking at a potential 35% reduction at age 60, and a 20% reduction if you retired at age 60.

Don't get me wrong -- those are huge cuts. But that's exactly what happened to retirees current and future at the bankruptcy sisters, and like it or not, AA's pension is a huge plus for the workers as far as future benefits go.

 

[777 fixer]

Not in your wettest dream 777... You must be insane to think i want to fly around on hundreds of super80s for the rest of my life...

I'll take those MD-80's over an A320 anyday. I know people like to blast AA for keeping the MD-80's around while other carriers stock up on 737NG's and A320's. However by deffering delivery of 737's AA is putting itself in a good postion for being a launch customer for the next generation narrow body.

Most other airlines took paycuts and got their pensions ripped as well... now the company is not near as likely to turn to the employees for more cuts b/c they can go no lower than the present...

Really? Tell that to the pilots at US Airways(pre merger). In March 2003 US Air terminated their pension plan and handed it over to the PBGC. In 2004 US Air came back and told them they needed more. And guess what, they got it and then some. So do not delude yourself into thinking that just becasue a pension plan is terminated reduces the odds that they will come back for more.