RETIREMENT

[enough already]

Do people on this board know the difference between "their" and "there"?

Their, they're now. Have patients ;-)

 

[FWAAA]

Their, they're now. Have patients ;-)

While not a misspelling, my favorite internetism is "for all intensive purposes." Doesn't appear often, but always funny when someone types it.

 

[Hatu]

American Airlines reassures workers on pensions

American Airlines tells employees most will get full pensions even if plans are terminated

DALLAS (AP) -- American Airlines is trying to reassure employees that most of them will get full pensions even if the company terminates its retirement plans in bankruptcy.

In a letter to employees Monday, a top American official said more than 90 percent of those whose pension benefits have vested would get everything they are owed.

The letter from Jeff Brundage, senior vice president of American parent AMR Corp., suggested that most of those whose benefits could be reduced are pilots or upper management, who get higher salaries and pensions.

http://finance.yahoo.com/news/American-Airlines-reassures-apf-2764315945.html?x=0

 

[Frank Szabo]

While not a misspelling, my favorite internetism is "for all intensive purposes." Doesn't appear often, but always funny when someone types it.

Duz that hav somfun to du wif ejumakashun?

 

[tech2101]

While not a misspelling, my favorite internetism is "for all intensive purposes." Doesn't appear often, but always funny when someone types it.

Irregardless of the fact that it is an incorrect statement only posted by loosers.

 

[xUT]

Irregardless of the fact that it is an incorrect statement only posted by loosers.

Arg... that drives me nuts (if that's possible)...

 

[Bob Owens]

AA also lowered their lease costs substantially in 2003;

Ok I'll bite, how much?
Delta lowered theirs by $1billion, and Ual by around $800 million.

I merely mentioned the value of the stock in early 2007 ($41/sh) for some perspective.

Perspective? The discussion was about what AA should have done in 2003 and you you quote the stock value in 2007.

You wrote;"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. "

The worth of a company isnt exactly a concrete figure, in other words if the current trading value of a stock is $40/share and there are 200,000,000 shares out ther that does not difinatively mean that the company can be bought for $8 billion. Its a number that has no real value and you know it, because its based on speculation and what the owners are willling to do. If they dont want to sell it cant be bought, if someone is looking to buy it all then the price may go up, or if the company files bankruptcy, even though they have plenty of money it will likely go down.

The funding of the pension is another intangible figure. When you say it was fully funded what do you mean by that? To some it means fully funded as far as there are enough funds to cover the obligations, that figure is varaible based on assumptions, which are debateable as well, then there is fully funded based on the legal requirements and we are all aware that AA was given an extension to meet the previously stated version of "Fully Funded". Obviously the claim that they were "fully funded" to where they could cover the obligations of the plan back in 2007 is false because we have not accumulated enough additional benefits since 2007 to drive the shortfall up to where it is now.

You wrote; 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.

Yawn is right, what do you base that rediculous claim on? Even if the company had been able to implement the"Vermont Plan" they would not have cut Labor costs that much, certainly not operating costs. You are mixing costs and wages, AA may have the highest costs, but as far as maintenence they have the lowest wages.


You wrote;The APFA has a good explanation on their site that answers your questions:

Thanks but I wanted your answer.

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

Yes I saw that yesterday, we are going beyond the window since the "reorganization" but Ok, I'll play. So they are going from 2001 to 2011. In 2001 they had 129,000 employees, now we will say 80,000, so on average 104500 employees , $3 billion divided by 10 is $300 million a year, Wages over that period would be around $80billion and 5% of that would be $4billion. So they saved $1billion. IIRC you were in agreement that AA was saving money with their DB pension, why all of a sudden the change?

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).

We shall see, but the Judge is only supposed to abrogate the deal if its onerous, the last few contracts that were settled in this industry provided considerbly higher wages and better benefits than we have and some of those carriers already went through BK . If our wages and benefits are already the lowest, how are they going to prove that they need to be lowered still in order for AA to be on a level playing field? Isnt that the purpose of C-11? Is C-11 supposed to create an unfair advantage over competitors therefore making C-11 the new normal way of doing business? Why would any company pay their bills and honor contracts? Back in the 2002 BK cycle we at AA screwed everybody, we agreed to terms that were lower than what the courts had granted. UAL was granted a temporary 14% paycut with benefits and workrules intact, then we gave 17.5% and gutted benefits the same month that UAL negotiated 1% back. The LCCs earn a lot more than us as well, even Jet Blue tops out at $40/hr and by July 1 the top paid line mechanic at UAL(in Hawaii) can earn as much as $40.53. USAIR is in Mediation, having gone two rounds through BK they earn more than us when benefits are added in and will earn even more when their automatic 3% increase kick in this Summer. You're the one who claims to be a lawyer, show me an example where a Judge ruled that the wages of an employer, that were already the lowest in the industry, were considered onerous.

Again, the court won't care. The only thing that the judge will care about is the motion to abrogate.

Well he had better care, thats why they call them "Judges".

Ok, I still have no idea what that number represents.

Thats ok, because its BS, like many of the numbers that the company throws out there as far as labor.

AA has funded the pensios with almost $3 billion since 2003.

Make up your mind, now, is it the last 10 years (2001-11), 2002 or 2003? In one post you cited three different points in time.

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.

According to the company around 2% of the TWU would be affected. Being that an AMT CC tops out at around $70K I have to wonder who the 2% would be? A Crew chief would need 49 years with the company to get to $54000. Not too many guys with 49 years, at least not yet.

 

[FWAAA]

Ok I'll bite, how much?
Delta lowered theirs by $1billion, and Ual by around $800 million.

I haven't seen any reliable sources where DL or UA claim those savings. Are those supposed reductions on an annual basis or a total over a several year period (like the DC politicians like to claim)? In 2004, prior to DL's bankruptcy, it paid $716 million in aircraft rent and in 2005 (year of DL's bankruptcy filing) it paid $541 million. In 2006, it paid $316 million and in 2007 (when bankruptcy was done), DL paid $246 million. Impressive, but at best, $470 million. Not a billion. Same story at UA; the $800 million looks exagerrated. I don't have precise numbers for AA right now, but I'll look.

Perspective? The discussion was about what AA should have done in 2003 and you you quote the stock value in 2007.

You wrote;"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. "

The worth of a company isnt exactly a concrete figure, in other words if the current trading value of a stock is $40/share and there are 200,000,000 shares out ther that does not difinatively mean that the company can be bought for $8 billion. Its a number that has no real value and you know it, because its based on speculation and what the owners are willling to do. If they dont want to sell it cant be bought, if someone is looking to buy it all then the price may go up, or if the company files bankruptcy, even though they have plenty of money it will likely go down.

The hypothetical takeover price of AMR is not what I'm talking about. A bankruptcy results in stock price equals zero, so a bankruptcy filing to rid AA of a few Fokker leases and some vacated STL terminal space would have destroyed billions of shareholder worth. AA was profitable in 2007 despite paying rent on those four Folkkers and the STL space. November's filing came once the company's market cap had fallen to just a few hundred million. Your earlier assertion was that AA should have "taken care of" those surplus properties, but the only way to do that with certainty is to file Ch 11.

The funding of the pension is another intangible figure. When you say it was fully funded what do you mean by that? To some it means fully funded as far as there are enough funds to cover the obligations, that figure is varaible based on assumptions, which are debateable as well, then there is fully funded based on the legal requirements and we are all aware that AA was given an extension to meet the previously stated version of "Fully Funded". Obviously the claim that they were "fully funded" to where they could cover the obligations of the plan back in 2007 is false because we have not accumulated enough additional benefits since 2007 to drive the shortfall up to where it is now.

Yes, based on all the assumptions, the pensions were funded at year end 2007. They're underfunded now (and have been since 2008) because the trust investment assets fell in value, just like the APFA document clearly indicates. Over the past few years, your position appears to be "AA should have funded the plans with a few billion more just in case the asset values fell." Well, that ain't how the world works.

Yawn is right, what do you base that rediculous claim on? Even if the company had been able to implement the"Vermont Plan" they would not have cut Labor costs that much, certainly not operating costs. You are mixing costs and wages, AA may have the highest costs, but as far as maintenence they have the lowest wages.

I'm not talking about maintenance wages. I couldn't care less about maintenance wages. I'm talking about overall labor costs, and had AA filed for Ch 11, it might have slashed labor costs by an additional $2 billion or more per year. Of course we'll never know whether or not AA would have achieved cuts that deep.

My prediction is that AA cuts its labor costs by at least that much now that AA has actually filed. In a year or two, we'll know how close my prediction is.

You wrote;The APFA has a good explanation on their site that answers your questions:

Thanks but I wanted your answer.

I've written it repeatedly. AA funded the pensions, the markets melted down, and the pensions went from "funded" to "underfunded." Fairly straightforward.

Yes I saw that yesterday, we are going beyond the window since the "reorganization" but Ok, I'll play. So they are going from 2001 to 2011. In 2001 they had 129,000 employees, now we will say 80,000, so on average 104500 employees , $3 billion divided by 10 is $300 million a year, Wages over that period would be around $80billion and 5% of that would be $4billion. So they saved $1billion. IIRC you were in agreement that AA was saving money with their DB pension, why all of a sudden the change?

Make up your mind, now, is it the last 10 years (2001-11), 2002 or 2003? In one post you cited three different points in time.

Ten years would be 2002-2011, not 2001-2011. The latter would equal 11 years.

Your employee numbers look a little high. Eagle has been more than 10k employees for the entire decade and they, of course, are not participants. Your wage numbers are far too high. In any event, the defined contribution costs to WN for the past 10 years have been far larger (on a relative or percentage basis) than the cash contribution costs for AA's pensions. Beer and Arpey were correct when they said that, and I've consistently agreed.

There's no sudden change. The pension required, on average, $300 million in cash contributions over the past decade, as total AA contributions are about $3 billion for 2002-2011. WN, with a much smaller workforce, spent almost that much, on average, for its defined contribution plan contributions (including 401k matches) for the decade. On a cash basis, the AA plans required less cash each year on average.

But the bankruptcy filing presents an opportunity to fix things for the long term. If the markets do not repeat a long-term upswing (like, say, 1982-2008), then the cash required each year would inevitably increase. On top of that, the cash required is unpredictable. AA contributed just $10 million in 2009 but had to contribute $466 million in 2010.

The other component that bankrupty brings is the very likely prospect of lower wages, and thus, much smaller defined contribution plan expenses. In 2011, AA paid out about $4.8 billion in non-executive wages to employees. Benefits were about $2.0 billion on top of that. I don't know if your assumption of 5% of wages is appropriate, but if it is, that's $240 million a year. Of course, pilots already get a B plan (defined contribution) of 11% and that's not out of line with the competition.

Delta employees are celebrating profit sharing today of about $267 million for 2011. In March of 1999, AA paid out $341 million in profit sharing, and there was much rejoicing. So once AA slashes wages, work rules and benefits and thus cuts labor costs by a couple billion dollars per year, it can once again return to paying out a few hundred million in profit sharing.

We shall see, but the Judge is only supposed to abrogate the deal if its onerous, the last few contracts that were settled in this industry provided considerbly higher wages and better benefits than we have and some of those carriers already went through BK . If our wages and benefits are already the lowest, how are they going to prove that they need to be lowered still in order for AA to be on a level playing field? Isnt that the purpose of C-11? Is C-11 supposed to create an unfair advantage over competitors therefore making C-11 the new normal way of doing business? Why would any company pay their bills and honor contracts? Back in the 2002 BK cycle we at AA screwed everybody, we agreed to terms that were lower than what the courts had granted. UAL was granted a temporary 14% paycut with benefits and workrules intact, then we gave 17.5% and gutted benefits the same month that UAL negotiated 1% back. The LCCs earn a lot more than us as well, even Jet Blue tops out at $40/hr and by July 1 the top paid line mechanic at UAL(in Hawaii) can earn as much as $40.53. USAIR is in Mediation, having gone two rounds through BK they earn more than us when benefits are added in and will earn even more when their automatic 3% increase kick in this Summer. You're the one who claims to be a lawyer, show me an example where a Judge ruled that the wages of an employer, that were already the lowest in the industry, were considered onerous.

Well he had better care, thats why they call them "Judges".

The judge will care about the law and the facts that the law requires the judge to consider, and my earlier post made it clear that the past is the past and won't be a consideration. I see that the paragraph above is another argument about AMT wages. I'm talking about overall wages, and in that category, I expect AA to seek (and get) savings of $2 billion or more. Of course, very little of that could possibly come from cutting AMT hourly rates - as they'd probably all leave. I do think that by time AA exits Ch 11, AA will employ no more than about 5,000 maintenance and related, which would be roughly equivalent to DL and UA, relative to size and fleet count.

AMT hourly wages? I'm guessing that AA will offer as much as it takes to prevent everyone from seeking more lucrative employment, and for many mechanics in major metro areas, almost every employer is paying mechanics more than your top rate.

According to the company around 2% of the TWU would be affected. Being that an AMT CC tops out at around $70K I have to wonder who the 2% would be? A Crew chief would need 49 years with the company to get to $54000. Not too many guys with 49 years, at least not yet.

The numbers I heard yesterday were that about 90% of AA's employees would see no reduction in a distress termination, and that most of the 10% who would, are management and pilots. The company also said that if you remove those two groups, then 98% of everyone else would get their earned (accrued) pension benefit with no reduction. The only non-management, non-pilots with big pensions might be someone who retired at age 60 after 40 years whose monthly check exceeds the age 60 PBGC limit, which is $2925/mo for single life annuity or $2632.50/mo for joint & survivor annuity.

One additional thing, however. AA's pensions permit most employees to retire at 60 with no penalty. But since the PBGC will extract a huge penalty, anyone under age 60 who is thinking of retiring now may be strongly encouraged by the PBGC age 60 penalty to either keep working to age 65 (so their pension won't be whacked) or defer collecting their pension until age 65 (same result). Anyone with lots of years of service who is thinking of retiring before 65 should consult an advisor before doing anything irrevocable.

But yes, I don't see a distress termination harming very many non-management, non-pilot employees or retirees. The $3 billion AA contributed over the past decade was for the primary benefit of pilots and management, not TWU or APFA or agents.

 

[WorldTraveler]

It is true that pension terminations are not done for the primary purpose of reducing pension expenses... they are done for the primary purpose of providing some sense of certainty regarding costs because there is a great deal of uncertainty in planning the amount of money that is necessary to fund DB pensions. With $8-10 billion in unfunded pension liabilities, AA will seek termination (if they do so) in order to remove alot of the financial uncertainty from their future. An inevitably smaller workforce will result in lower pension obligations based on lower base salaries at least in the near term.
.
As far as reducing lease expenses, DL did reduce these expenses significantly but they also reduced the size of the fleet - exactly what AA is likely to do... we don't know the details of the lease alterations that AA will get - only that AA is rejecting some leases. It is inevitable that some leasing companies will accept altered terms.

 

[BoeingBoy]

In the short term, since companies don't generally try to get rid of pensions unless they're pretty underfunded, it's about saving money, at least that's the expectation. Long term it allows the company to know the pension cost with reasonable accuracy. Of course, terminating or freezing DB plans determines what "short term" and "long term" means. A terminated plan saves money immediately while a frozen plan could take up to 17 years to save money.

Jim

 

[Bob Owens]

I haven't seen any reliable sources where DL or UA claim those savings. Are those supposed reductions on an annual basis or a total over a several year period (like the DC politicians like to claim)? In 2004, prior to DL's bankruptcy, it paid $716 million in aircraft rent and in 2005 (year of DL's bankruptcy filing) it paid $541 million. In 2006, it paid $316 million and in 2007 (when bankruptcy was done), DL paid $246 million. Impressive, but at best, $470 million. Not a billion. Same story at UA; the $800 million looks exagerrated. I don't have precise numbers for AA right now, but I'll look.

It came from a newpaper article, granted that may not be the most reliable source but its certinly more trustworthy than something written by someone who uses an alias.

Yes, based on all the assumptions, the pensions were funded at year end 2007. They're underfunded now (and have been since 2008) because the trust investment assets fell in value, just like the APFA document clearly indicates. Over the past few years, your position appears to be "AA should have funded the plans with a few billion more just in case the asset values fell." Well, that ain't how the world works.

No my position was we should have opposed AAs request to get an extension on fully funding the pension. Like I said "fully funded" can be many different things.

I'm not talking about maintenance wages. I couldn't care less about maintenance wages.

I am and I do, if you dont want to talk about maintence then dont bother replying to my posts.

Your employee numbers look a little high. Your wage numbers are far too high. In any event, the defined contribution costs to WN for the past 10 years have been far larger (on a relative or percentage basis) than the cash contribution costs for AA's pensions. Beer and Arpey were correct when they said that, and I've consistently agreed.

Its off the 10ks.

 

[strikeforce]

In the short term, since companies don't generally try to get rid of pensions unless they're pretty underfunded, it's about saving money, at least that's the expectation. Long term it allows the company to know the pension cost with reasonable accuracy. Of course, terminating or freezing DB plans determines what "short term" and "long term" means. A terminated plan saves money immediately while a frozen plan could take up to 17 years to save money.

Jim

AA has saved 10B by not "fully" meeting it's OBLIGATION to fund the pensions. In other words.....their screwing the same people that bent over back wards and handed them 1.6B in 2003. These so called company executives are crooks, and I truly believe these guys take pleasure in screwing the workers. And, when the worker rebels, they turn to the courts. It's becoming the norm where corporate america doesn't know how to run businesses and know how to compete, so they turn their anger towards the employees. That's exactly what all these airlines have done....DL, UA, AA, CO, US, it really doesn't matter what logo is on the tail.....the worker has suffered at the hands of the greedy bastards, and all the labor unions are just as guilty.

AA will certainly change, but change for the worst....because workers at some point WILL retaliate against those that screw them enough. It's only a matter of time and AA will go by the wayside like EA, Pan Am and TWA. Those were all giants in their time and then they too screwed their workers when THEY couldn't compete. It's a vicious circle jerk for airline workers. The story is the same....just change the logo!!!!

 

[eolesen]

AA has saved 10B by not "fully" meeting it's OBLIGATION to fund the pensions.

Tell me, Carmine, has a single pensioner said that their monthly check bounced or wasn't received?...

If not, AMR's been fully meeting its obligation.

As far as I can tell, prior to the filing, AMR met all of their legal funding obligations.

 

[strikeforce]

Tell me, Carmine, has a single pensioner said that their monthly check bounced or wasn't received?...

If not, AMR's been fully meeting its obligation.

As far as I can tell, prior to the filing, AMR met all of their legal funding obligations.

Legal funding obligations isn't the same as future obligations vs. plan assets. AA is 10B in the hole, and down the road A pensioner....whether it's a pilot, mechanic or agent will see their pension reduced or eliminated. Just ask the airline workers at TWA, EA and all the others that had pension deficits and were picked up by the PBGC. Some worked 20, 30 years and are now getting $150 checks. Honestly, can you survive on $150 E????? With the deferred contributions, along with 1.6B in employee handouts.......This management team has been financially reckless. I've said before and I'll continue saying it until these guys are booted out the door!!!

 

[Bob Owens]

Eagle has been more than 10k employees for the entire decade and they, of course, are not participants.

I noticed on the Brundage Q&A that when they talk about the $3 billion put in the pensions they dont say "defined Benefit pensions", so more than likely the figure includes both the DB the DC plans.