RETIREMENT
- Thread starter wrencher
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APFA's Glading is outraged: http://blogs.star-telegram.com/sky_talk/2012/01/apfa-outraged-that-amr-didnt-make-its-pension-payment-in-full.html
http://www.cbsnews.com/8301-505245_162-57362237/us-says-american-airlines-underpaid-on-pensions/
http://www.cbsnews.com/8301-505245_162-57362237/us-says-american-airlines-underpaid-on-pensions/
Are you surprised?
More evidence of widespread denial among labor group leadership at AA, this time from Glading:
http://www.apfa.org/content/category/9/554/626/
On November 29, it became crystal clear to those not so emotionally involved that the AA pensions would certainly be frozen as a part of its bankruptcy. There would be no point in filing a Ch 11 petition if the pension issue were not resolved. Given the pension terminations at US and UA (and the termination of DL pilot pension), the likelihood of termination was fairly obvious on Nov 29 as well.
http://www.apfa.org/content/category/9/554/626/
On November 29, it became crystal clear to those not so emotionally involved that the AA pensions would certainly be frozen as a part of its bankruptcy. There would be no point in filing a Ch 11 petition if the pension issue were not resolved. Given the pension terminations at US and UA (and the termination of DL pilot pension), the likelihood of termination was fairly obvious on Nov 29 as well.
Airlinelifer
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I sincerely hope all my counterparts at AA the best of luck. I just want to say that this is going to be a gut wrenching experience. One minute you will be recieving so much information (both true and false) that it will make your head spin and then their's going to be times when you don't hear anything, a dead zone which will also play with your mind. This rollercoster ride is not for the timid, hang in their, try to get your finances in order and do the best job you can do. I know it's hard, the employee takes the brunt of the cuts and the executives just move on with "golden parachutes."
MY AIRLINE TIMELINE
........... MIA EAL 08-1982 to 03-1989 Strike
........... MIA/FLL NWA 06-1989 to 04-2008 Concessionary contracts/Bankruptcy
........... FLL DAL 2008 to present Merger/ Lost union representation vote
No pity from me, just empathy because I've been thier.
Good Luck
Didn’t you hear this one is different then all the others
No point? So you think that paying for airplanes you dont fly and facilities you dont use isnt more of a reason to file than the pensions? Back in 2003 they lead us to believe that they had addressed all those things, now we find the truth. IIRC one of the frequent contributers to this board claimed that his current employer took it in the shorts as part of AAs outside of BK reorganization, that workers werent the only ones who got screwed in 2003, well his company must have been the only one.
AA admitted in negotiations that they did not expect to save any money by switching to a DC plan, only that they expected their may be savings down the road, in fact they admitted that it would cost them more now.. Its been cited repeatedly how some competitors who went BK had higher costs with the DC plans than AA had per person. With a DC plan the company cant put off the payment, like they can with a DB, and with a DB the company may noy have to contribte anything when the market is performing well.
I dont doubt they will make a grab for the pension, after all its a big number that sits on their books and makes them look bad to investors when they compare numbers with companies that dont have a DB. They write that off then they can claim that they made a miraculous turnaround and use that to justify huge bonuses for themselves. On the flip side, if they do take the DB then they lose leverage at the bargaining table because a DB pension ties you to a single employer. No DB and now you have to push for higher wages and more OT instead in order to get more into the 401K (at competitors the company contribution is a percentage of total pay, with our DB its based only on 2080 hours so the more they bleed the company the more goes into their pension fund). Not only would we be pissed because we got screwed out of what we earned but we would have even less concern over whether or not the company survives down the road. Squeeze it for as much as you can while its there, if they fold, somebody will buy the planes , routes and facilities, roll your box over and start all over again but take your 401K with you if you havent made it to retirement.
According to my total value statement a year of work added around $1200 to my "earnings" for the year because of our DB pension, however at 5%, which is one of the things that UAL got(depending on age) when UAL terminated their DB plan back in 2005 they would have put at least $3350 in the 401k, plus at least another $750 for the OT worked (based on $15000 worth of OT at max rates, some guys would have had around $2250 more).
So AA would have had to put aroud $4100 instead of $1200.
IIRC AA claims they have put $2 billion in the plan since 2002, so that comes out to around $200, 000,000 a year or around $2500 per employee (80,000). Some of these people must be getting pretty big pensions!
I hope Gotbaum keeps up the fight, What AA may be doing, which you say is a sure thing, is nothing less than fraud, and we helped them. AA pushed to have their pension obligations spread out over 15 years, we helped get Congress to agree to it, claiming that competitors were given pension relief in BK, so they legally underfunded it, built up this huge liability while saving money (which they may have used to pay leases on planes sitting in the desert or facilities they dont use) compared to competitors who did not get the opportunity to underfund and put off catching up an extra eight years, now after saving money all those years they want may want to, according to you, dump it. AA would make out like a bandit, as others had to pay into their DB plans AA was underfunding their DC plan, sure the liability was building up, but now according to you they are going to dump it. They would have screwed the PBGC by dumping the liability on them and screwed over all their workers who would have lost out on eight years of defined contributions to their 401ks in addition to seeing their pensions slashed. Millions of dollars that should have gone into our pensions instead were used to pay banks or whoever owned those unused properties that the company should have dumped back in 2003. Its basically a transfer of wealth from workers to the banks.
No, Bob, as I've posted before, AA addressed 70 of the 74 F100s in 2003 but four of them remained. And no, you don't file a Ch 11 petition to get out of lease payments on four F100s and some vacant real estate. AA abandoned much of STL after the May, 2003 concessions. MCIE wasn't abandoned until long after the 2003 restructuring. You may not remember, but in January, 2007, AA's market cap was more than $8 billion, and you don't flush that kind of shareholder value so you can reject a few leases. Once AA filed in November, however, it's going to take care of each and every superfluous piece of equipment and real estate. For 2010 and 2011, the pensions required a total contribution of over $1.0 billion in cash, and AA saw that drain on cash continuing unless the equity markets staged another 1982-2008 run, and how likely is that to repeat in the near term?
Let's be realistic - AA filed a bankruptcy petiton so it could force the pay and benefits issue, get rid of large numbers of MD-80s (or lower their lease rates until new planes come to replace them) and to reduce its debt levels. I'm sure it will make lowball offers to labor, which will probably be rejected, leading to a motion to abrogate the contracts. That happens and AA's annual labor savings projection is on the order of $2 billion plus. While in bankruptcy, of course, it's a good time to reject the leases on the remaining old planes, like the MD-80s and older 757s. Fuel was still cheap in 2003 (compared to 2011), so the failure to get rid of all the MD-80s that year can be excused (at least by me).
I agree. I have long argued that Beer and Arpey were correct when they sparred with the Wall St analysts who criticised them for not dealing with the pension in 2003. However, if you slash wages enough while in bankruptcy, those wage savings can pay for the increased current cash cost of defined contribution plans. To use round numbers, if AA cuts its annual wage and benefit expenses by $2 billion, it can afford a couple hundred million more in Defined Contribution retirement expenses.
For some AA employees, moving to another airline (or for mechanics, moving to another employer with any mechanical stuff that breaks and needs repaired) might make sense. Moving to another unionized employer means somewhat low pay for a while until you top out. For some workgroups, that might happen quickly. For others (like pilots or FAs), that can take a dozen or more years.
We've discussed this before and I have idea where AA gets those numbers or how it allocates contributions to you. I doubt anyone does. What we do know is that in 2011, AA contributed $520 million in cash to the pensions, which comes to nearly $8,000 per active FTE at AA (about 66,000 of them). And we do know that in 2010, AA paid out $581 million in pension checks to retired employees.
The $2 billion is the old number - add almost $1 billion contributed during 2010 and 2011, and the new number Horton and others have used is "more than $3 billion" in the past 10 years. AA's plans have more than 130,000 participants, including a lot of people who are retired and getting checks, a lot of former employees who aren't yet getting checks and about 66,000 current FTE employees at AA.
The changes in the law permitting AA (and CO) more time to make up shortfalls did not keep AA from fully funding its pensions: at the end of 2007, AA's plans were 98% (or 96%, I don't remember and I'm too lazy to look) funded. Of course, the market meltdown soon changed that. The markets didn't do too badly in 2011, so the funding percentage should have improved. We only get that number once a year in the 10-K. Fraud? Uh, ok. Even if true - who cares? Transfer of wealth to banks? Even if true, who cares? Language that mimics the generalities of the Occupy movement ain't going to accomplish what should be your goals. How does any of the above get you a pay raise?
IMO, you need to focus on how to increase the hourly wage of the people you represent. Arguments about the lease cost on four F100s and some vacant terminal space are a complete waste of time. Arguments about the events of the past nine years are irrelevant. All that should matter, IMO, is coming to an agreement that raises your members' hourly pay to something well above its current rate, as it's already at the bottom.
The fact that they were paying for leases on planes they did not even fly are only the most extreme examples of waste, when Delta went BK they were able to lower their lease payments by around one billion a year and UAL by around $850 million according to the press.
Who cares, who is talking about 2007? What was their market cap in April of 2003? What is it now? So they had a good year in 2007, did they make use the opportunity to catch up on the pension or did they give the executives bonuses (or whatever you want to call them) instead? How many hundreds of millions went to the executives in these added payments since 2003? They can afford what they want to afford.
How much have they saved over the last eight years by underfunding it? How much will UAL/CAL have to contribute to their 401 Ks? How much did AA pay in 2009 towards the pension? ZERO.
Lets say AA pays $6.5 billion a year on average in wages since 2002(thats taking out $200 million a year for the pension), 5% of that would be $325 million a year or $3.25 billion over the last ten years, so they still saved a billion since they admit that since 2002 they have only contributed $2billion to the pensions.
From what I see and hear the place is a powderkeg, a lowball offer may be enough of a spark to set it off. This isnt 2003 where we just recieved decent raises a year earlier, we have been bleeding for eight years, in real terms we are twice as bad off now as we were prior to recieving those raises, if you recall there was a lot of disruption in the industry prior to those raises. AA brought us to court, UAL brought their workers to court, and there may have been others in response to spontaneous wildcat actions. We are already the lowest paid in the industry. Sure we may have around 2500 mechanics on nights on the line that earn around 50 cents an hour more than USAIR but the other 7100 earn less than USAIR. When you add in the value of their Holiday pay and vacation they are ahead of all of us, even the night shift line guys. In July they get an automatic 3% increase if they dont get a new TA by then, that would put them ahead us all of us no matter how they try and spin it.
Fuel may have been cheap in 2003 but the revenue was low, around $7 billion a year lower than 2011 with around 30,000 more people on the payroll. Payroll was over a billion higher and revenue was around $7 billion less. Did fuel costs go up by over $8 billion/year? Lets not forget that they shrunk the company by a third as well, a third less airplanes, a third less landings, a third less fuel burned, etc etc.
Its their number not mine and they add it directly as income along with our wages, Social security and benifits paid. Why would they report a lower than actual number when they are trying to show us the total value of our compensation? Are you admitting that AA makes up numbers for convienience?What the number really is the amount our annual pension goes up for the extra year of service based on the formula. Its a BS number and should not be there because if we die before retirement we never actually get that money. Every year they include that figure, but people tend to work 30 or more years but rarely collect retirement checks for 30 years and there is not estimate on how much they saved in wages because of the pension.
And they contributed ZERO on 2009 so that year it was $zero per FTE at AA. Thats the problem with your snapsots, you pick out a single number in a single year (like 2007) instead of looking at the long term. As discussed already they claimed, in late 2011 to have contributed $2billion since 2002, their claim, not mine, that comes out to $200 million a year counting 2002, in 2002 they had 109,000 total employees and now you claim its down to 66,000, so rough average is 87000, so that comes out to around $2300 per employee over the longer term, not the one convienient year you picked.
And we know that has nothing to do with this conversation since those people are retired and paid out of the pension funds and not from the Treasury of AA. If AA properly funded the pension then their is no cost to AA once they are retired, the funds should already be there. How much money did the pension fund itself generate that year?
Bob not hammering on you just making a point ,you just gotta love a union like the TWU who on behalf of the company lobbies the government for pension relief without any gaurantees on our behalf and then they file bankruptcy threatening the vary basis of our retirement. Man if this ain't enough to throw this piece of s$$$$$$$$$t union out I don't know what will. I do know we have to ride this horse through BK, If the membership doesn't get rid of them after BK they(we) deserve everything thats comeing.
AA also lowered their lease costs substantially in 2003; AA also lowered the lease rates on the ex-TWA MD-80s in 2001 when AA purchased the TWA assets. Now, of course, AA will lower its lease costs yet again.
You don't file for Ch 11 to terminate leases on several airplanes or to reject leases on some vacant terminal space. I merely mentioned the value of the stock in early 2007 ($41/sh) for some perspective. AMR was worth well over $8 billion and was profitable in 2007 even with all the "extreme examples of waste" you have pointed out. Did they catch up the pension? Why, yes, they did, as the pension was fully funded at year-end 2007.
Since you mentioned your favorite topic, executive "bonus" payments, here's some additional perspective: Had AA filed for Ch 11 in 2003, salary, wage and benefit costs would have been reduced by at least an additonal $2 billion per year (I'm certain you'll disagree, as you're still in denial about what will happen to labor costs now that AA is in Ch 11). By that math, employees of AA earned about $18 billion of additional wages, salaries and benefits above what they would have been if AA had filed Ch 11 in 2003. What were the total PUP/PSP payouts? $350 million or $400 million? If so, look at it this way: In exchange for keeping wages, salaries and benefits $18 billion higher over those nine years, management took about 2% of that amount - a few hundred million dollars - for themselves. Yawn.
The APFA has a good explanation on their site that answers your questions:
http://www.apfa.org/images/retirement/how_safe_pension_plan.pdf
The pensions were fully funded at the end of 2007. The market meltdown in 2008-09, of course, caused the pensions to again be underfunded. As even the flight attendants know, it wouldn't make sense to force AA to make up that shortfall all at once, since the markets can recover (and largely have recovered). Yes, AA contributed zero to the pensions in 2009 because the funding formulas took the end of 2007 into account (when the pensions were fully funded).
AA has contributed almost $3 billion to the pensions since 2002. As I pointed out earlier, you're using the old number ($2 billion) that was from 2009 or before. In 2010 and 2011, AA contributed almost $1.0 billion to the pensions. The contributions are listed in the 10-Ks, in case you don't believe me. In a statement almost two weeks ago, AA said:
"AMR has contributed almost $3 billion to its defined benefit pension plans over the last 10 years.”
http://blogs.star-telegram.com/sky_talk/2012/01/amr-responds-to-pbgc-comments-letter-from-ceo-to-workers.html
As has been posted by numerous people, the past is irrelevant now. The company doesn't care about the past, and in ruling on a motion to abrogate the contracts, the judge wont care about the past. I predict that AA trims its wages, salaries and benefits by about $2.5 billion a year; look for 2013 total labor expense to be closer to $4.5 billion instead of $7.1 billion (2011 total).
Again, the court won't care. The only thing that the judge will care about is the motion to abrogate.
Ok, I still have no idea what that number represents.
I picked 2007 because at the end of that year, the pensions were fully funded, contrary to the constant BS and blather that you and others spout on a frequent basis. As even the APFA realizes, the underfunding happened not because of systematic underfunding, but because of the largest market declines in decades. In 2008, the Dow Jones Average dropped by almost half. That caused the pension funding level to fall, just like with my pension (CALSTRS and CALPERS). AA has funded the pensios with almost $3 billion since 2003.
Pension funding levels will always be a snapshot - because the following year, more employees earned more money, requiring addtional contributions. Asset values increase or fall, also changing the funding levels/
Besides, even if terminated, the only employee group that will be harmed are the pilots. If AA had shoveled another $2 or $3 billion into the pensions in 2008 and 2009 (enough to make them fully funded today), that action would have primarily benefitted the pilots, not the mechanics, not the FAs, not fleet.
In 2010, the pension plans had investment income of $837 million, or 12% (not too shabby) and in 2009, the plans earned $928 million, or 14%. As the markets recovered from 2008, so did the pension trusts. We'll know in a couple of months how the plans did in 2011.
BoeingBoy
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Actually, every present and future beneficiary represents a liability for the pension funds and the amount of that liability vs what's in each fund determines whether the fund is underfunded or not. If the pension funds are underfunded AA has to put more money in than it would if the plans were fully funded so retirees do affect AA's employee costs and thus the bottom line.
Jim
