Change of Control, the New American Airlines and the PBGC

[usa1]

The proposed merger of American Airlines Inc. and US Airways Group Inc. will bring together two airlines with two very different pension plan stories.
Between 2003 and 2005, after US Airways filed for bankruptcy, the Pension Benefit Guaranty Corp. took over four of the airline's pension plans, saddling the agency with about a $2.8 billion loss.
In early 2012, after American Airlines parent company AMR Corp.'s November 2011 Chapter 11 bankruptcy filing, American said it intended to terminate its four massively underfunded pension plans.
At the time, the PBGC which would have taken over the obligations, estimated the plans had about $8.3 billion in assets and about $18.5 billion in promised benefits. If they had folded, the PBGC would have been liable for about $17 billion in promised but unfunded benefits, resulting in an $8.7 billion loss to the agency, which would have been the PBGC's biggest loss in its history. The PBGC's biggest loss was its 2005 takeover of four United Airlines plans, which cost the agency about $7.3 billion.
But amid strong pressure from the PBGC, American reversed course in March and agreed to freeze the plans, effective Nov. 1, 2012.
The PBGC currently estimates that the four plans, which have about 130,000 participants, are 42% funded with liabilities of $21.3 billion and $8.86 billion in assets.
American said it expects the merger to be completed during the third quarter of 2013. The merger airline would be named American Airlines, American said Thursday in announcing the merger.

 

[mike33]

Any lawyers in the room. It sounds like they plan to merge American Airlines into US Airways and make it a wholly-owned subsidiary of American Airlines Group Inc.?

1.1 The Merger. Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the Delaware General Corporation Law (the “DGCL&rdquo😉, at the Effective Time, Merger Sub shall be merged with and into US Airways and the separate corporate existence of Merger Sub shall thereupon cease. US Airways shall be the surviving entity in the Merger (US Airways is hereinafter referred to with respect to post-Effective Time periods as the “Surviving Corporation&rdquo😉 as a direct wholly-owned subsidiary of American (American, as reorganized pursuant to the Bankruptcy Code, is hereinafter referred to from time to time with respect to post-Effective Time periods as “American” or “Newco”)---------------------------------------------------------------------------------------------------------------
pg.82

4.16 Stock Exchange Listing and De-listing. American shall use its reasonable best efforts to cause the shares of Newco Common Stock to be authorized for listing on the NYSE or NASDAQ upon official notice of issuance, prior to the Closing Date, and American shall use its reasonable best efforts to have Newco’s trading symbol reflect the American Airlines brand after the Closing Date. The Surviving Corporation shall cause the shares of US Airways Common Stock to be no longer listed on the NYSE or the principal securities market on which the shares of US Airways Common Stock are then listed or quoted and de-registered under the Exchange Act as soon as practicable following the Effective Time.
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pg 3​

1.6 Certificate of Incorporation.

(a) Newco. Immediately prior to the Effective Time, the certificate of incorporation of American shall be amended and restated as set forth on Exhibit A hereto, until thereafter duly amended as provided therein or by applicable Laws (the “Newco Charter&rdquo😉, with such changes thereto as may be reasonably agreed between American and US Airways prior to the date the Prospectus / Proxy Statement is initially mailed to US Airways stockholders. Immediately following the Effective Time and pursuant to the Plan, the Newco Charter shall be further amended to change the name of Newco from “AMR Corporation” to “American Airlines Group Inc.”.​

( B) Surviving Corporation. Immediately following the Effective Time, Newco shall cause the certificate of incorporation of US Airways to be amended and restated as set forth on Exhibit B hereto, until thereafter duly amended as provided therein or by applicable Laws.​

USA1...........i'm not a lawyer by any means and not smart enough to be one for sure, but i think US becomes a sub of "Newco "(Bkrupt AA ) only for the Bankruptcy part and then becomes a subsidiary of " American" and then Post-effective becomes American Airlines Group Inc..​

I believe this has to be done to Freeze Pensions and certain obligations as a relief of future liabilities. And according to the stack exchange, LCC no longer exists.​

I'm of course hoping........................xxxxxxxxxxxx​

 

[usa1]

USA1...........i'm not a lawyer by any means and not smart enough to be one for sure, but i think US becomes a sub of "Newco "(Bkrupt AA ) only for the Bankruptcy part and then becomes a subsidiary of " American" and then Post-effective becomes American Airlines Group Inc..​

[background=rgb(252, 252, 252)] I believe this has to be done to Freeze Pensions and certain obligations as a relief of future liabilities. And according to the stack exchange, LCC no longer exists.[/background]​

[background=rgb(252, 252, 252)][background=rgb(252, 252, 252)] I'm of course hoping........................xxxxxxxxxxxx[/background][/background]​

I plan to call the PBGC soon to find out when we can expect to hear something. My guess is, we will not hear anything until the two are on one certificate. The way I see it LCC, US Airways, US Airways Group Inc and the certificate that begins with US are all dead ....... We are going to find out what Josh Gotbaum thinks about senior US Airways agents and flight attendants. He froze the AMR pension and now we are going to help fully fund it for them ... with nothing in return for us.

 

[mike33]

I plan to call the PBGC soon to find out when we can expect to hear something. My guess is, we will not hear anything until the two are on one certificate. The way I see it LCC, US Airways, US Airways Group Inc and the certificate that begins with US are all dead ....... We are going to find out what Josh Gotbaum thinks about senior US Airways agents and flight attendants. He froze the AMR pension and now we are going to help fully fund it for them ... with nothing in return for us.

Im not so sure about fully funding it. I believe a frozen pension is just that and doesnt accumulate any funding by the employer.

http://www.forbes.co...red-a-lump-sum/

It means that the estimates change at the date that you would have retired had it not been frozen. Loss of about 60%. But it is still there. Just not with the PBGC........

 

[usa1]

Its underfunbed right now. Has to be made whole.

 

[mike33]

Its underfunbed right now. Has to be made whole.

How is a freeze different from a termination?
When a company freezes its pension, employees may stop earning benefits, but the pension plan continues in operation. It continues to be insured by the federal pension insurance corporation, and there is the possibility that the plan could be unfrozen. When a plan terminates, however, it stops completely and ceases all operations. If the plan is "underfunded" some or all of the promised benefits are likely to be paid by the federal pension insurance program. If the plan is "overfunded" it will be turned over to an insurance company, which will take over payment of the benefits


"The freezing of American's plans will have no impact on its retirees who will continue to receive promised benefits. However, active participants no longer will accrue benefits. Less than half of plan participants were accruing benefits, an American Airlines spokesman said. American, though, will make an automatic 401(k) plan contribution for pilots equal to 11% of their pay, and will match other employees' contributions, up to 5.5% of compensation."

The PBGC's Mr. Gotbaum described the freeze as a “mixed result” for American's pension plan participants. “Today marks a mixed result for the people of American Airlines. We of course are pleased that they will get to keep the pension benefits they have already earned, but it is unfortunate that going forward their retirement benefits will not provide the same level of security as a traditional pension,” he said in a statement Thursday.

 

[usa1]

I understand .... but what I'm saying is, I've heard that the AMR frozen plan is currently under funded. Benefits are still guaranteed to AMR beneficiaries, but the new company will have to fully funded it over the next few years. I don't see the PBGC being involved with it in the future. Meaning current US Airways employees will be helping fund it, but receiving nothing in return. Don't get me wrong, I applaud Gotbaum's effort, wish he would have been around when ours was terminated. US Airways employee's keep coming up on the short end of the retirement stick. We disparately need to start our PBGC at 55 and be allowed to continue working at American Airlines for a few more years to have any chance at a comfortable retirement, even if it is several years later than we planned.

 

[mike33]

This may ease ur mind regarding COC...from a article today

http://www.dallasnew...ay-in-check.ece

" Parker wants to avoid that trap, along with another pay controversy. About 250 US Airways execs have change-in-control provisions that accelerate the vesting of stock awards and provide severance payments of one to two times annual salary.

Those who lose their jobs will get both benefits. But Parker is asking the others to waive the equity acceleration, even though it’s in their contract. That’s a big potential windfall, given the rise in US Airways’ stock price.

 

[usa1]

Here is a case to watch ..... I hope they keep their retirement benefits. We (US) have none.

http://aviationblog....e-weekend.html/

Also over the weekend, the APFA updated its members on American’s motion for a partial summary judgment on a lawsuit the airline filed last summer against the Section 1114 Committee. American claims it is not contractually obligated to provide retiree benefits (health and life insurance) to its retirees.

On Jan. 23, the U.S. Bankruptcy Court in New York heard arguments on the motion and has taken the matter under consideration. If the court denies the motion for even one of the various groups of retirees, it will then conduct a full trial and hear evidence on the vesting question, according to the APFA.

The recently announced merger with US Airways “does not change American’s obligations to its retirees” while these matters are pending in court, the APFA said.[font=Helvetica Neue']

[/font]

 

[usa1]

American Airlines, Inc. (AA) is a major U.S. airline owned by AMR Corporation, headquartered in Fort Worth, Texas. It operates an extensive international and domestic network, with scheduled flights throughout North America, the Caribbean, South America, Europe, and Asia/Pacific. Dallas/Fort Worth International Airport is the airline's largest hub, with American Airlines and AMR's regional carrier American Eagle accounting for about 85% of the traffic and 83% of the landing fees at the airport and traveling to more destinations than from its other hubs. The airline operates maintenance bases at Tulsa (TUL) and Fort Worth Alliance (AFW); the latter was announced to close by December 2012.

Its name not withstanding, American Airlines is not a flag carrier, as that term is generally used in commercial aviation. Its subsidiary shares its name with American Eagle, and operates much of the regional carrier's flights; since November 2012, the subsidiaries of SkyWest, Inc., SkyWest Airlines and ExpressJet Airlines, have also operated regional flights as American Eagle. In addition, AmericanConnection is the regional brand for codeshare flights currently operated by Chautauqua Airlines.

In November 2011, AMR Corporation filed for Chapter 11 bankruptcy protection. Chairman and CEO Gerard Arpey stepped down and was replaced by company president Thomas W. Horton. In February 2013, American Airlines and US Airways announced plans to merge, creating the largest airline in the world. In the deal, which is expected to close in the third quarter of 2013, shareholders of AMR will own 72% of the new company and US Airways shareholders will own the remaining 28%. The combined airline will carry the American Airlines name and branding; the holding company AMR will be renamed American Airlines Group Inc.

More:


Merger with US Airways

Main article: American Airlines–US Airways merger

On February 14 2013, American Airlines and US Airways Group officially announced that the two companies would merge to form the largest airline in the world. In the deal, which is expected to close in the third quarter of 2013, bondholders of American Airlines' parent AMR will own 72% of the new company and US Airways shareholders will own the remaining 28%. The combined airline will carry the American Airlines name and branding, while US Airways' management team, including CEO Doug Parker, will retain most operational management positions. The headquarters for the new airline will be consolidated at American's current headquarters in Fort Worth, Texas. The merger will create the world's largest airline, which, along with United Airlines and Delta Air Lines, will control three-quarters of the U.S. market.

 

[Slopoke]

Deleted

 

[usa1]

There will be no more US Airways. Don't let the people at PBGC tell you different this time!

AMR and US Airways executives expect the merger to be finished by the third quarter, but it could take 18 months to fully combine the two airlines as they seek permission from the Federal Aviation Administration for one operating certificate.

According to a regulatory filing Thursday by Tempe, Ariz.-based US Airways, the new company would be known as American Airlines Group Inc. The name would replace AMR "immediately after the effective time of the merger," the filing stated.

In announcing their merger agreement Feb. 14, American CEO Tom Horton said the new carrier would be called AMR Corp. and operate under the American Airlines name.

"Our filing speaks to our understanding," John McDonald, a US Airways spokesman, said in an email when asked about the name. "Can't really expound beyond that."

Horton "must have just misspoke" in a conference call on the merger last week, Mike Trevino, an American spokesman, said in an emailed statement. Trevino confirmed the new name.

An AMR spokeswoman told the Tulsa World last week that the name of the new company would be American Airlines Group. It would be based in Fort Worth, currently the location of AMR's headquarters.

American Airlines shareholders approved creation of a new holding company called AMR Corp. in 1982, according to the carrier's website.

Read more from this Tulsa World article at http://www.tulsaworl...nk450141&r=2283

 

[usa1]

For months, US Airways Chief Executive Officer Doug Parker has said a tie-up, if approved, would keep the name of the larger American and its Fort Worth, Texas, headquarters. In announcing their merger agreement on Feb. 14, American CEO Tom Horton said the new carrier would be called AMR Corp. (AAMRQ) and operate under the American Airlines name.

http://www.bloomberg...can-merger.html

 

[usa1]

The AFA Newsletter for US Airways Flight Attendants

February 27, 2013

I. PBGC PENSION AND THE MERGER IMPLICATION

Long before the merger between American Airlines and US Airways was announced, I contacted the PBGC to inquire about the possibility that flight attendants may continue to work and be able to collect their pension (provided they were age qualified) should a merger occur and a new company be formed. The initial answer I received from the PBGC stated the answer would depend on several factors including the corporate structure of the new company.

Since the merger was announced, I contacted the PBGC, they informed me that they will make no decision regarding this possibility until after the merger is finalized. The Company hopes to have the merger completed sometime in the third quarter of this year. Once the merger is finalized, the PBGC will review all of the new corporate documents to make a decision. Please note this decision is not just for flight attendants, but all employees of US Airways who have their pension with the PBGC.

You may go to www.pbgc.gov for updates. Once a decision is made by the PBGC I will send out an e-line with information explaining their decision. Do not listen to rumors and do await the official word from the PBGC.

Please note all provisions of the plan will remain in effect for taking your pension prior to age 62 if you were US Airways/Allegheny,/Piedmont/Shuttle, or age 65 for PSA. There is a 3% per year reduction for each year prior to age 62/65 beginning at age 55. You cannot begin collecting your pension until age 55 (52 Shuttle) according to the plan documents.

Also, the rumor that the new company can negotiate away our PBGC pension is false. Your pension is secure with the PBGC and the new company cannot take that away from you.

II. PBGC PENSION AND SOCIAL SECURITY OFFSET

The Social Security Offset was part of the original US Airways Pension Program. When the pension was terminated on January 10, 2005 the entire plan is to be administered by the PBGC.

The Social Security offset is a step down in pension amount when the flight attendant and their spouse reach age 62. The offset has nothing to do with the amount of money you are to receive from the Social Security Administration. Whatever the amount of Social Security income you earned you will receive. The offset is already included in the PBGC formula.

The May 2000 contract provided a second pension formula that did not include the so-called "social security offset". The new additional formula was not implemented for 5 full years, so the credit to acknowledge the new formula was not given per the PBGC rules and regulations. The PBCG ran both pension formulas. In most situations, the formula that contained the social security offset provided the higher rate of payment.

III. WORKING WHILE COLLECTING SOCIAL SECURITY

You can begin collecting your Social Security early at age 62 with a reduction in the amount of benefit you receive. If you continue working you can only earn $15,120 as of 2013 per year before Social security will begin deducting $1 for every $2 over the earning limit. Should you decide to wait until you reach full retirement age (check government website listed below for your full retirement age as age varies) you can collect your benefit with no reduction to your Social Security benefit and no earnings limit penalty. For further information, go to www.ssa.gov.

III. HEALTH INSURANCE FOR RETIREES

If a flight attendant decided to retire and leave US Airways at age 55 (age 52 for Shuttle), but prior to age 65 they may continue health insurance coverage through the HCTC program of the IRS. In order to qualify for this program, you must be collecting your PBGC pension. Currently the IRS pays 72.5% of the premium, and you pay 27.5%. You may obtain further information at www.irs.gov search: HCTC.

Medicare will become your health insurance if you retire at age 65. Should you continue working as a flight attendant past age 65 the provider specified in your collective bargaining agreement will be your healthcare provider.

 

[usa1]

Please note all provisions of the plan will remain in effect for taking your pension prior to age 62 if you were US Airways/Allegheny,/Piedmont/Shuttle, or age 65 for PSA. There is a 3% per year reduction for each year prior to age 62/65 beginning at age 55. You cannot begin collecting your pension until age 55 (52 Shuttle) according to the plan documents.

That provision is not in the [background=transparent]RETIREMENT PLAN FOR CERTAIN EMPLOYEES OF US AIRWAYS INC. [/background]I have the material from the PBGC in front of me.