Will AA declare bankruptcy?

[Hopeful]

I dont know of anyone saying that, however if you look at the companys proposal and where we are now its pretty close to what they said they would seek in BK under the Vermont Plan, however now they have 30,000 less employees, 200 less airplanes, bring in around $5 billion more and have around $5 billion in cash. We see where those who went through BK are, their pensions are frozen, had them replaced with 401k matches, AA wants to put all the new guys on the 401K plan, so what do you think will happen to our pension in a few years? The flip side is they have their OT rules, their Holidays, vacation and sick time. Things that pay in the here and now while we gave that stuff up for the pie in the sky should AA exist when we retire.

What I have said is that whether or not they go BK has nothing to do with us. We arent a big enough group and our contract demands arent enough to send this company into BK. Agreeing to concessions under the assumption that should they file anyway, like USAIR did, that the courts would be kinder to us are false. In New York they are starting A&Ps at the third step, starting Title II guys at the fourth step-6 months and they are at top pay, they had to make a special scale for the JFK Boiler Mechanics who earn more than any of us. Where are they going to go as far as wages in BK when they are have to start new people near the top of the scale? We got hosed already. The workforce is never static, people are and always will be leaving. Thats doesnt just go for AA that goes for the entire industry. The number of people coming into this industry continues to shrink. AA is paying huge amounts of OT, if they could get people in at the starting rate the hourly costs, including benifits would be much less than paying all that OT. This isnt 2003, despite high unemployment there isnt a huge supply of mechanics out there. For the pilots the shortage is even more pressing, I recently ran into a laid off AA pilot who was working for World Airways. He said that he had already turned down recall and had no intentions on going back to AA. So the pilots have a real advantage, however their very generous pension plan is what the company has for counter leverage. BK would have a much bigger impact on them than it would us. We may still have our pension in place, but make no mistake your pension has been cut, by inflation. If you cant live off the wage you will not be able to live off that wage based pension either.

Bob,
In the event of a CH. 11 filing, let us be realistic. The wonderful management at AA will ask a judge to rewrite and decimate every article on our contract.
Many of us in this business know many others who have worked for carriers who have gone bankrupt. The ones i know have said NOTHING beneficial to them as mechanics ever evolved.
We will be no different.

 

[Bob Owens]

Not so much...

At NW (ramp and stores) we lost:

Vacation= Lost 1 week

We Lost a week as well without going BK

Holidays= Lost 3, and the remaining-if worked- are paid at 2.0x instead of 2.5x

We lost Five with remaining paid if worked at 1.5x (in other words half pay)

Sick time= First 7 paid at 75%

First two paid at 50% and we lost 7 days accrual each year, we now only get 5 days/year. Company admits that average usage is 5.1 days per year.

Pension: Frozen, and replaced going forward w/one run by the IAM
Pay: Anyone hired after the CBA went into effect are on a 10 year scale instead of 5

I believe our Fleet and Stores guys are on a 10 or 12 year scale and have been for many years. In Maint its a five year scale however if the company cant get people at those wages they can raise the starting wage at their sole discretion up to top pay and beyond with an LOA(such as the boiler mechanics at JFK). In NY they start at the third step for Aircraft Maint and the 4th step(top out 6 months after probation) in Facilities and Automotive.

OT rules: Lost the "short hour" (also known as the easy hour at some carriers)

We lost that as well, plus the company can keep us 4 hours over at straight time rates for training and we have permanent letters of discipline called CR-1s that remain in our files forever.

Since your merger with non-union Delta have you gotten anything back? How does the IAM run your pension when there's no union at Delta?

 

[Kev3188]

Since your merger with non-union Delta have you gotten anything back?

Not a thing...

How does the IAM run your pension when there's no union at Delta?

Our CBA is still in effect while the NMB sorts out the claims of Carrier Interference. With that being the case, DL is still making monthly contributions for covered employees... They tried to get out of doing so, but no go...

 

[Bob Owens]

Bob,
In the event of a CH. 11 filing, let us be realistic. The wonderful management at AA will ask a judge to rewrite and decimate every article on our contract.
Many of us in this business know many others who have worked for carriers who have gone bankrupt. The ones I know have said NOTHING beneficial to them as mechanics ever evolved.
We will be no different.

Well we saw what they got so what makes you think that if they went that route that we would end up worse than them? Remember that we agreed to our concessions before they went though their second round of cuts. We drove the standard down even lower than the first round of BK frulings. If we got every penny we are asking for it would not be enough to put AA in C-11. We arent asking for that much, and the savings that they would get gutting our contract arent enough to warrant going C-11. If our costs were so high then why isnt the Junior guy in our system sitting with a 1998 seniority date? Why has the company continued to insource and not only recall but hire more workers? Now it might be a different story with the pilots but we have absolutely no control over any of that so why should we act like we do? When they threaten us with BK we need to say go ahead but its not going to change our position on what we need. I feel that the company loses more revenue, pays more OT and pays out more due to poor operational performance than our proposal would cost them, so in other words they could end up saving more than it would cost them to simply give us what we are asking for. They still fail to understand that everytime they take something away they also lose morale and drives a lack of interest, that translates into delays, cancellations, lost revenue, additional operating costs and more OT. So we end up with mechanics pulling down what they need through OT but having airplanes that dont make trips in order to do that. It would be cheaper to just pay the guys and have them motivated to fix things instead.

 

[Bob Owens]

Our CBA is still in effect while the NMB sorts out the claims of Carrier Interference. With that being the case, DL is still making monthly contributions for covered employees... They tried to get out of doing so, but no go...

Ok that explains something I read a while ago. Delta had a $12 billion pension obligation compared to AMRs $7 billion.

 

[WorldTraveler]

Ok that explains something I read a while ago. Delta had a $12 billion pension obligation compared to AMRs $7 billion.

because DL has not terminated pension plans for most of its employees....
they are frozen for all but the PMDL pilots but frozen for the rest, including PMNW personnel. As Kev notes, the unresolved representation situation means DL is still paying DB benefits for those personnel whose CBA requires it - but the funding requirements for the IAM DB pension are "on" the IAM's books, not DL's.
Thus, DL's pension obligations are higher because they are also providing 401K benefits to employees today.
.
Part of the reason DL and NW - who were separate at the time of the pension freezes - sought the pension freezes instead of terminations is because the PBGC received substantial equity positions in the organized UA and US as a result of the termination freezes which DL and NW did not want to have to provide - since it dilutes the value of what creditors could receive.
.
The Texas legislative delegation fought for AA and CO to be allowed to freeze their pensions but the PBGC and others argued that provision should only be given to distressed carriers.
.
Wall Street including its creditors will not allow AMR to reorganize with its current pension responsibilities... it is an enormous obligation that is part of why AA's stock price has declined.
.
My suggestion - and encouragement - would be for AA's labor groups to argue for those provisions to be once again be reconsidered and granted to AA. CO doesn't need them but it is perhaps that another exception could be made for AA/AE employees. Terminating AMR's pensions does no one any good and the PBGC really does not want to take them over... allowing AMR to stretch out its payment plan might allow them to freeze the pensions but not terminate them.
.
It will only happen if AA employees fight for it.

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It's also worth noting that even before DL filed for BK, it was already moving toward a performance-based, short-term employment type model that did not include the long-term commitments that are part of the traditional airline compensation model. When DL created Song, I am pretty sure that employees were told they had a limited amount of time they could remain at the carrier which had compensation models different from DL - and I believe those employees did not participate in DL's defined benefit pension plans - but I'm not 100% certain of that.
DL also convinced the pilots to accept performance based compensation as far back as the 1996 contract.
Thus, by the time DL filed for BK, it was pretty clear that it wanted out of the long-term obligations of defined benefit pension plans and was trying to disincentivize career employment - the same trend that had was sweeping thru the business world at large.
The notion that an employee could expect a full retirement from a company w/ no contribution from the employee was replaced in the general business world many years ago w/ the idea of limited contributions of the company and employee responsibility for his/her retirement.
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It is pretty well accepted that DB plans are virtually extinct... AA employees and their labor groups should be trying to find solutions that allow AA to NOT terminate but rather freeze the plans and provide decent contribution levels to 401K type plans, esp. for more senior workers for whom even a freeze will have negative effects since pension funding typically increases dramatically with both age and years of service.

 

[chris perry]

AMR'S 401k plan is pretty sad,it has been listed several times as one of the worst....Our own credit union don't recommend it....
No match,no nothing notta....I have never seen a proposal from AMR that even comes close to Southwest's...They continue to short change everything at nego,put something on the table..this take it all mentality is not working...throw some stock incentives, a match, and make a deal.... Or go to bankruptcy,not many here care anymore....It would actually be a relief for workers. thats how bad relations are here.

 

[Kev3188]

because DL has not terminated pension plans for most of its employees....
they are frozen for all but the PMDL pilots but frozen for the rest, including PMNW personnel. As Kev notes, the unresolved representation situation means DL is still paying DB benefits for those personnel whose CBA requires it - but the funding requirements for the IAM DB pension are "on" the IAM's books, not DL's.
Thus, DL's pension obligations are higher because they are also providing 401K benefits to employees today.

Point of order; DL is NOT contributing to PMNW workers' 401k's who have not yet resolved representation issues (ramp, stores, agents, and reservations).

Why would the funding be on the IAM's books? DL is the one paying into it on our behalf.

 

[FWAAA]

Thus, DL's pension obligations are higher because they are also providing 401K benefits to employees today.

No, the DL defined benefit pensions (even though frozen) are underfunded by about $12 billion, compared to AMR's underfunding of about $7 billion. That DL now provides defined contribution plans and contributes to those does not affect the underfunded nature of the DB plans. Bob Owens remembers reading it because I highlighted the fact a few weeks ago.

The Texas legislative delegation fought for AA and CO to be allowed to freeze their pensions but the PBGC and others argued that provision should only be given to distressed carriers.

No, that's not what happened. Congress provided long-term pension underfunding catch-up relief that requred that the DB plans be frozen. AA sought (and finally obtained) similar long-term catch-up funding relief WITHOUT having to freeze its plans. To date, AA has not attempted to freeze its plans.

Wall Street including its creditors will not allow AMR to reorganize with its current pension responsibilities... it is an enormous obligation that is part of why AA's stock price has declined.

Yes, and the sky is still blue and airplanes have wings. No airline has been able to reorganize in Ch 11 and maintain its DB plans intact, and neither will AA. Of course, UA and US were faced with multi-billion pension contributions that they could not fund, so the pension issue helped drive the timing of ther bankruptcies.

My suggestion - and encouragement - would be for AA's labor groups to argue for those provisions to be once again be reconsidered and granted to AA. CO doesn't need them but it is perhaps that another exception could be made for AA/AE employees. Terminating AMR's pensions does no one any good and the PBGC really does not want to take them over... allowing AMR to stretch out its payment plan might allow them to freeze the pensions but not terminate them.

AMR already has the benefit of long-term funding relief and it didn't have to freeze the plans, thanks to changes by Congress. If AA wants to freeze the plans, all it has to do is agree with the unions to do so.

Arpey, for all his faults, has fought to preserve the AA pensions and has a well-documented aversion to Ch 11. Nevertheless, a Ch 11 filing by AA is probably a certainty at this point, along with a termination or freeze of the DB plans. The only unknown variable is the date of the petition.

 

[WorldTraveler]

Kev,
I noted that DL is providing DB benefits of which the 401ks are not.
The IAM plan will never be on DL's books because if it is underfunded that will be the IAM's responsibility.
It probably doesn't matter to DL as much whether it is an IAM DB plan or a 401K... in fact for DL for several years, it might be cheaper to fund the IAM plan.
For you, it means you will have a host of pension benefits, none of which will deliver huge payments.


FWAAA,

The point remains that AA cannot continue to fund its pension plan underfunding while continuing to allow benefits to accumulate.
We can agree that it is highly unlikely that AA will emerge from a restructuring - or be able to continue w/o restructuring - w/ continuing DB plans.
I wasn't trying to say that DL's plans are more underfunded because they also contribute to 401ks... just that they are paying for both... something that UA and US are not doing.
.
If it remains only a matter of AA negotiating w/ the unions to either freeze or terminate the plans, then senior AA people esp. should be particularly aggressive in fighting to freeze rather than terminate the plans....
but of course, AA's ongoing - post BK/restructuring costs are likely to be far higher under a freeze instead of a termination even if it means a greater stake by the PBGC in their restructuring so they will use that as a negotiating tool.

 

[Buck]

At what point would the DB stop and 401k (w/match) begin?

The aging workforce at AA cannot afford to start with a new 401k. While the PBGC would essentially take care of the upper tier of the those older employees, where is the age point where a employee can afford to do save in both plans ans have possibility of some kind of success?

 

[Frank Szabo]

At what point would the DB stop and 401k (w/match) begin?

The aging workforce at AA cannot afford to start with a new 401k. While the PBGC would essentially take care of the upper tier of the those older employees, where is the age point where a employee can afford to do save in both plans ans have possibility of some kind of success?

If the DB plan were only frozen, no further benefits would be earned and the company would continue to administer the plan with benefits determined as of the last day it was in force. Additional retirement funds would be built within a 401(k) structure.

If the DB plan were to be dumped on the PBGC by the company, the plan assets would go to the PBGC and they would pay out as would the company but only up to a maximum yearly benefit - E says this amount is over $50k per year. Very few, if any mechs would be hurt by this (except maybe Blackman at LGA). That component of the pilot's retirement would be compromised, as would that of salaried people not falling within the scope of the $46 million fund Carty supposedly did all by his lonesome and his subsequent falling on his sword.

As I understand the rules, the PBGC will only pay the maximum benefit to recipents 65 year and older - those who retired earlier than 65 will take a helluva hit on their pension payments even though the company rule was full payment at age 60.

 

[strikeforce]

This thread is the very reason why the US gov't is in deep trouble. I partially blame the company for failure to contribute to it's OBLIGATIONS. Obligation means contract, right?? More on that later. And, I place most of the blame with our gov't for allowing these companies to circumvent their responsibilities to the employees. Then again, our own gov't has given themselves a pass for it's own obligations to Social Security, Medicare and all the other programs set up as sacred cows.

Look, it's too easy for companies in the US to file BK, freeze and terminate pensions because they're only screwing the same people they want more production from. I guess I will never understand why corporate america can find comfort in screwing with employee benefits they promised ME 21 years ago and then expect me to jump thru hoops to care for our customers. Same goes for our gov't....it's nothing more than a huge cookie jar for our elected leaders, and the american people just sit and watch these clowns steal and give the money to their friends. And then, when the SS jar is empty....they tell the american people that are ENTITLED to that money...."we don't have enough to give you", too bad!

Does anyone know what obligation means anymore???? Last time I checked it meant contract or promise to pay. This is what AA agreed to many moons ago. It promised to contribute, save, or invest a certain amount of money for me....i.e. through an investment vehicle because AA promised ME that when I retire I can collect from this investment vehicle, right. Now, the company is NOT holding up to their end of the bargain.....again, does anyone know what bargain means.....yes, it means to promise to do something, and in this case means to contribute. All along I held my end of the bargain by coming to work everyday, follow AA's policies, and fix their airplanes, so AA could make money and hold it's end of the bargain. I guess I was WRONG!!!

BTW, can someone explain to me what "freezing the plan" means?? Does it mean AMR stops contributing to the plan, and AMR hands whatever funds it has in the plan to the PBGC???

 

[FWAAA]

BTW, can someone explain to me what "freezing the plan" means?? Does it mean AMR stops contributing to the plan, and AMR hands whatever funds it has in the plan to the PBGC???

Your last sentence describes a plan termination as happened at UA, US and the pilots at DL. Freezing the plan would mean that further benefit accrual would stop but AA would still contribute money to the plan to pay current benefits and to ensure future benefits (to those not yet retired). It would mean much smaller pension checks when you eventually retire than you were expecting - you'd be treated (as would everyone else not already retired) as having quit the company on the date the plan was frozen. When you eventually retire, you would then get a monthly check but it would be very small unless you already had a lot of years and age when the freeze happened.

 

[Frank Szabo]

This thread is the very reason why the US gov't is in deep trouble. I partially blame the company for failure to contribute to it's OBLIGATIONS. Obligation means contract, right?? More on that later. And, I place most of the blame with our gov't for allowing these companies to circumvent their responsibilities to the employees. Then again, our own gov't has given themselves a pass for it's own obligations to Social Security, Medicare and all the other programs set up as sacred cows.

Look, it's too easy for companies in the US to file BK, freeze and terminate pensions because they're only screwing the same people they want more production from. I guess I will never understand why corporate america can find comfort in screwing with employee benefits they promised ME 21 years ago and then expect me to jump thru hoops to care for our customers. Same goes for our gov't....it's nothing more than a huge cookie jar for our elected leaders, and the american people just sit and watch these clowns steal and give the money to their friends. And then, when the SS jar is empty....they tell the american people that are ENTITLED to that money...."we don't have enough to give you", too bad!

Does anyone know what obligation means anymore???? Last time I checked it meant contract or promise to pay. This is what AA agreed to many moons ago. It promised to contribute, save, or invest a certain amount of money for me....i.e. through an investment vehicle because AA promised ME that when I retire I can collect from this investment vehicle, right. Now, the company is NOT holding up to their end of the bargain.....again, does anyone know what bargain means.....yes, it means to promise to do something, and in this case means to contribute. All along I held my end of the bargain by coming to work everyday, follow AA's policies, and fix their airplanes, so AA could make money and hold it's end of the bargain. I guess I was WRONG!!!

BTW, can someone explain to me what "freezing the plan" means?? Does it mean AMR stops contributing to the plan, and AMR hands whatever funds it has in the plan to the PBGC???

"Freezing" the plan means simply that no further benefit will be earned/accrued by the plan participant, no matter how much longer he/she might work for the company. If, on the day of termination, one has 20 years of credited service, no more will accumulate to increase your monthly payments from the pension plan. I believe this is what Delta did with their people. The plan is still administered by the company and the rules the company had set forth prior to the freezing still apply, if that's the case.

"Termination" is simply that - the company quits all involvement in their former pension plan and hands all records and funds to the PBGC for it to administer BY ITS RULES. Those who retired prior to age 65 are due for a severe haircut - not sure what happens if said retirees ended up over 65 before the termination took place. Payments are made (if over 65) up to a yearly maximum (E says over $50k - not sure).

Any further accrual in retirement funds will come from participation in a 401(k)-type instrument - the pension is done re: further accruals. Not the best of situations, but not terribly horrible, either.

This is as I understand the rules - check 'em out for yourself or speak with a retirement counselor for best results.