Will AA declare bankruptcy?

[limit]

My understanding of it is,and I hope i have it correct....that

If you would like to put an approximate # on this value , if the plan is frozen ,go to jetnet and look at the $ number for your accumulated retirement benefit on the retirement page.
I have not checked lately, but it should say something like "if you left the company at 12/31/2010 this is what you will receive at age 65".
So if the plan was frozen at 12/31/2010 this is what you should expect.
Right?

 

[strikeforce]

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.

"Freezing the plan would mean that further benefit accrual would stop".

What is the purpose behind freezing the account if the company has to contribute money into the plan? From what I understand about pension plans...they're no different than an opening an IRA account for the indivdual employee, right or wrong? If that's the case why stop the investment part of the plan...which is basically what your doing when you say "stop the benefit accrual". The amount of contributions from AA would end, otherwise what's the point if AMR still has to contribute to the plan. It's the contribution part that AA wants to stop because they don't have the money? Therefore, the money in the account continues to be invested by the financial firm on behalf of AMR's employees, right?

Maybe I'm missing something here.

 

[WorldTraveler]

Frank's explanation is quite accurate.
The purpose of freezing a pension is that no further benefits can be accrued so it becomes possible to catch up on payments. It is sort of the principle that you cannot pay off your credit card debt if you continue to use them.
Yes, DL did freeze its pension plans... it was actually required as part of being able to defer repayment.

FWA,
According to the 2010 10Ks from each airline filed in Feb 2011, AA expected to make $520 million in payments to its pension plans compared to $600 M for DL. While you note that DL's underfunding is greater than AA's, you don't note that DL's total pension obligations are over $17 billion, more than twice AA's.
DL continues to make payments on its required pension obligations as does AA and DL also contributes to the new defined contribution plans that were established post-BK.

Because funding for defined benefit plans increases dramatically during the final years of service and at ages closest to retirement, if a plan is terminated or frozen esp. when an employee is in the last 5-10 years of service, it will be virtually impossible to make up for the benefit that was lost.
There is a chart about halfway down the page on this link w/ what DB funding typically looks like
http://401kpsp.com/401kdbdc.php

I don't know the specifics of AA's DB plans - and they may be different between different work groups, but they probably have a defined age and years of service for full pension benefits with deductions for years of service or age less than that... and that is why a freeze or termination will most affect older workers because the contributions they make in a 401K plan will not have enough time to gain returns before they are needed.
The key for survival is to assume that the plans will be terminated and begin saving for your own retirement as much as possible and as soon as possible.

 

[Bob Owens]

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.

Sorry to burst your bubble but I dont recall you bringing it up, I read it on an E-mail sent out by one of the Wall Street analyists a couple of weeks ago.

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.

Well we've been hearing that for at least 8 years now.

 

[Bob Owens]

My understanding of it is,and I hope i have it correct....that

If you would like to put an approximate # on this value , if the plan is frozen ,go to jetnet and look at the $ number for your accumulated retirement benefit on the retirement page.
I have not checked lately, but it should say something like "if you left the company at 12/31/2010 this is what you will receive at age 65".
So if the plan was frozen at 12/31/2010 this is what you should expect.
Right?

Thats my understanding however I'll admit that I'm not certain. You can fwd your question to Chuck Laterza, he handles the questions on the Pension plan.

My wife has no DB pension, they offer a 401k match and I encouraged her to take adavantage of the match even if we had to borrow the money to put in there. She was quite suprised when she got her statement. The 401k does have some "benefits". The chief one is that its portable, so you can take it with you. Your future is not tied to the company, what that means is that workers who start off with a 401K will likely be less committeed to the success of the company, they will be harder to threaten, especially if they regularly contribute to theiir 401Ks ,they will command a higher wage and be more focused on maximizing compensation in the "here and now" because they know that they are responsible for their own retirement. Thats the way it is where my wife works, people leave all the time. There isnt much tying them down and there's no reason whatsoever to accept concessions. WN has an 8% match on their 401K, so when you figure that on average they earn around $100k a year with a little OT thats $28,000 ($8000 match with $20,000 contribution) a year they can put in their 401K. So they can, over a 35 year career at that rate of pay, easily put away $980,000, figure double that with investment earnings over that same time frame and they could retire with nearly $2 million dollars. If WN goes bankrupt they dont get hosed.

 

[Bob Owens]

Did a look at the Pension planning page. I'm 50 and if the company went BK and Froze the pension as of 12/31/11 I would lose about 1/3rd of what my current Pension is projected to be, not counting the 401K replacement. So I would have to save up enough to provide around $1000/month between now and 60 years of age. Doesn't seem to be undoable, after all after going through BK and without the DB the company doesnt have much to threaten us with anymore. Non-Union outfits like Jet Blue are paying their guys a top Rate of $40/hr, so as USAIR and UAL continue through Negotiations, and having gone through BK I doubt either of them will settle for anything less than between $40 to $45/hr, unless of course we fold and submitt to another concessionary deal and cut their legs out from under them.

Those rates would put the 401K match at around $5100 a year or at least $10200 if we only put in enough to get the full match. At $40 or more I would put in the max, or 20% for a total of around $16640 plus the $5100 or $21740 for 10 years, (if over 50 you can put an additional $5500 over the $16500 max) that would give me $217400, not counting any interest, figure I should be able to pull down at least $33k in interest over 10 years so I should be able to add a total of around $250,000 by the time I turn 60. I would need to get 5% ROI in order to make enough interest to not draw on the principle, at just 3.5% I would have around $700 of the $1000/month we would lose if they froze the pension in BK. So its not the end of the world if the company went BK and froze the pension, and with $5 billion in cash I doubt the PBGC will let them off easy. Thats me, with 24 years in the plan and 25 years with the company. Older workers with more years would be less impacted, younger workers with more years would see a bigger impact but they would have more years to save and the company would not have the pension to hold over their heads as a means to supress wages.

 

[TWU informer]

Did a look at the Pension planning page. I'm 50 and if the company went BK and Froze the pension as of 12/31/11 I would lose about 1/3rd of what my current Pension is projected to be, not counting the 401K replacement. So I would have to save up enough to provide around $1000/month between now and 60 years of age. Doesn't seem to be undoable, after all after going through BK and without the DB the company doesnt have much to threaten us with anymore. Non-Union outfits like Jet Blue are paying their guys a top Rate of $40/hr, so as USAIR and UAL continue through Negotiations, and having gone through BK I doubt either of them will settle for anything less than between $40 to $45/hr, unless of course we fold and submitt to another concessionary deal and cut their legs out from under them.

Those rates would put the 401K match at around $5100 a year or at least $10200 if we only put in enough to get the full match. At $40 or more I would put in the max, or 20% for a total of around $16640 plus the $5100 or $21740 for 10 years, (if over 50 you can put an additional $5500 over the $16500 max) that would give me $217400, not counting any interest, figure I should be able to pull down at least $33k in interest over 10 years so I should be able to add a total of around $250,000 by the time I turn 60. I would need to get 5% ROI in order to make enough interest to not draw on the principle, at just 3.5% I would have around $700 of the $1000/month we would lose if they froze the pension in BK. So its not the end of the world if the company went BK and froze the pension, and with $5 billion in cash I doubt the PBGC will let them off easy. Thats me, with 24 years in the plan and 25 years with the company. Older workers with more years would be less impacted, younger workers with more years would see a bigger impact but they would have more years to save and the company would not have the pension to hold over their heads as a means to supress wages.

So where do you get the money to put in 20% to get your lost pension back?
You are advocating giving up the defined pension, so you can save 20% over the next 10 years?

Are you going to get us a 20% raise to cover that, or are we talking paycut?

Sounds like a stupid plan.
You are basically saying the defined pension is worth 20% of my pay if one has 10 years to retiement. More if you're older, less is you're younger.
Thanks for finally placing a dollar figure on it.

If you don't mind I would rather keep the defined plan , and stop trying to kill the golden goose or force it into Bankruptcy.
Was that T/A really that bad, now that you put your calculator to the cost of turning it down? You wouldn't rather have the $2.55 line premium than a requirement to save 20% just to match what you are about to lose? Do really think in Bankruptcy the Judge will give you a 20% raise to cover the lost defined pension? I dont!

Could you actually justify every potential negative with this type of logic?

 

[WorldTraveler]

Did a look at the Pension planning page. I'm 50 and if the company went BK and Froze the pension as of 12/31/11 I would lose about 1/3rd of what my current Pension is projected to be, not counting the 401K replacement. So I would have to save up enough to provide around $1000/month between now and 60 years of age. Doesn't seem to be undoable, after all after going through BK and without the DB the company doesnt have much to threaten us with anymore. Non-Union outfits like Jet Blue are paying their guys a top Rate of $40/hr, so as USAIR and UAL continue through Negotiations, and having gone through BK I doubt either of them will settle for anything less than between $40 to $45/hr, unless of course we fold and submitt to another concessionary deal and cut their legs out from under them.

Those rates would put the 401K match at around $5100 a year or at least $10200 if we only put in enough to get the full match. At $40 or more I would put in the max, or 20% for a total of around $16640 plus the $5100 or $21740 for 10 years, (if over 50 you can put an additional $5500 over the $16500 max) that would give me $217400, not counting any interest, figure I should be able to pull down at least $33k in interest over 10 years so I should be able to add a total of around $250,000 by the time I turn 60. I would need to get 5% ROI in order to make enough interest to not draw on the principle, at just 3.5% I would have around $700 of the $1000/month we would lose if they froze the pension in BK. So its not the end of the world if the company went BK and froze the pension, and with $5 billion in cash I doubt the PBGC will let them off easy. Thats me, with 24 years in the plan and 25 years with the company. Older workers with more years would be less impacted, younger workers with more years would see a bigger impact but they would have more years to save and the company would not have the pension to hold over their heads as a means to supress wages.

good work on the calculations, Bob. Some of the assumptions might have to be pressure tested but the process is valid.
It is possible to survive BK... other airline employees have.
But it can often take years just for people to readjust to their new income levels that do come w/ BK, let alone think about immediately setting in place a plan to help recover the pension benefits they have or might lose.
The key is being proactive.... if everyone sat down and did the calculations for themselves that you just did, then the process should not be as fearful as it otherwise might be.
I would encourage you to run some sample numbers involving other seniority and age combinations, have them double checked by an account, and then pass the info on TWU members.
Pension accounting is not simple but it is also is not a secret... w/ the right tables or calculators and someone who can help explain the challenges in meeting one's financial goals, it is possible to not only survive but to also thrive in the midst of uncertainty.

 

[Mr Red]

U need t talk to the people that wanted to retire in 2008. Half their 401 EVAPORATED by the Wall Street Ponzi schemes !!!

 

[fltguymk]

Not sure if this has been posted.. I am sure this is why so many pilots are stating to jump ship...
Allied Pilots Association

Section Six Update & Important Career Decisions

August 27, 2011 09:36

Fellow Boston Pilots,

---- and I just returned from ten days of Board of Directors meetings at APA HQ in Dallas. The Board conducted extensive confidential discussions regarding our negotiating positions in a wide variety of areas. We also received detailed financial briefings on AMR from ALPA’s expert E&FA team and from Mr. Filiberto Agusti, a nationally renowned attorney who specializes in the corporate restructuring process.

Let me begin this discussion by categorically stating: your APA Board of Directors remains universally committed to obtaining an INDUSTRY LEADING CONTRACT. Nothing less is acceptable.

During our ten days in Dallas the Board met with the AMR CEO Gerard Arpey, AMR President Tom Horton and AMR Senior VP of Human Resources Jeff Brundage. This was plain and simple a good faith effort offered to senior management by your union leadership to allow us to go face-to-face and address our Section Six concerns. Each of you has been e-mailed a copy of our opening statement presented at that meeting. Suffice it to say, as a result of this two-hour exchange we made our contractual expectations going forward patently clear to senior AMR management.

As we approach the six-year point in this process the APA Negotiating Committee and AMR negotiators including Mr. Brundage, are moving off-site next week in attempt to move forward with the Section Six process. It’s not lost on ---- and I that each of you has grown understandably impatient with AMR’s intransigence. And I’d be lying if I told you “we’re almost there.” The fact remains we still have significant differences in our negotiating positions, especially with reference to scope. However, we’ve agreed to make one last attempt to move the ball downfield. I remain guardedly hopeful we can make meaningful progress.

Now on to a much less pleasant subject, but one I feel obligated to discuss. Even if you’ve disregarded virtually everything I’ve said during the preceding five years, please listen to this:

For the record, I am legally bound by certain confidentiality agreements in order to participate in the negotiating process. Accordingly, I am limited in what I may tell you regarding specifics in AMR’s financial condition, our A-Fund pension funding level and AMR’s business strategy going forward.

The above said, it is my personal opinion there exists a whole range of possible financial outcomes for AMR completely irrespective of the Section Six process. One of those possible outcomes is a Chapter 11 reorganization. I do not say this to scare you, or suggest Chapter 11 is a highly probable event. But it is very clearly a possibility going forward. And not necessarily because of an AMR minimum cash threshold, but instead and as stated by Mr. Agusti, to maximize shareholder value by lessening corporate cost structure and dismissing unwanted debt.

Yes, I know it sounds strange, however Chapter 11 can actually be a corporate strategy regardless of cash position and any pain inflicted upon employees during that reorganization process. Have no misconceptions and please rest assured, you and I will have virtually no say in this corporate decision should it occur. As they might say, “Hey, it’s just business.”

Does this change our negotiating strategy or resolve? Not one bit. In fact I’ll repeat my assertion above: your APA Board of Directors remains universally committed to obtaining an INDUSTRY LEADING CONTRACT. Nothing less is acceptable. Period.

The reason I bring this critical matter to your attention is because of the grievous impact any Chapter 11 reorganization might have on our pension, lump sum payout or otherwise. It is therefore imperative that each of you take the time to study that impact and make your personal plans accordingly. I’m not proffering financial advice or making recommendations. Instead, my sole objective here it to ensure each of you is educated on the matter such that you may make a decision which best defends your personal financial well-being. In short folks, I don’t want to see anybody get harmed!

In an effort to educate our membership on A-Fund funding levels and the effects of Chapter 11 reorganization on our A-Fund pension, APA Pension Committee Chairman ------- has created an excellent update. This information has been vetted through our Washington, DC legal counsel James & Hoffman and outside counsel Mr. Agusti, and has been updated subsequent to ----'s most recent base blast.

In Unity,
BOS Vice Chairman

 

[Birdman]

Let me begin this discussion by categorically stating: your APA Board of Directors remains universally committed to obtaining an INDUSTRY LEADING CONTRACT. Nothing less is acceptable.

Can someone explain how this is not pretentious and arrogant?

 

[Jacobin777]

Bring it on. I hope the unemployment line treats you well.

Josh

Totally agree! It's bad enough in this current environment. Once should consider themselves fortunate just having a job.

If management put as much effort into managing the business as they do finding ways to circumvent labor agreements, airlines would make billions!

They management the business - how do you think they generate revenues and order new planes, etc.?

I would also like to know how they are "circumvent(ing) labor agreements"?

While I don't disagree with you that SCOPE probably represents the greatest single "threat" to AA pilots at the moment, your definitive statements above beg the obvious (at least to me) question: what about AA's competitors? If AA's legacy competitors - Delta and United - are able to shift more and more of their system capacity to regional operators that have lower-costs than Delta/United mainline (and certainly lower than AA mainline), then how are AA and the APA to respond? (And, of course, this doesn't even take into account the low-cost carriers whose "mainline" pilots make less than AA's.)

The solution I have long advocated is moving all flying - or at least all jet flying over, say, 70 seats - to mainline, APA pilots, but having the APA agree to fly those planes at pay scales more competitive with the market rates for other pilots flying planes that size. If the going rate for a 70-seat or 90-seat jet is X, and with far less benefits than APA pilots enjoy now, why couldn't the APA agree for its pilots to fly those planes at, say, 98% of X, and keep all of their mainline benefits (let's say - making up numbers - 5% additional cost), which would ultimately lead to AA's pilot costs for the jets being only marginally higher than for the competition (103% of market average)? That would seem like a reasonable compromise and winning proposition if it allows AA to remain competitive, but keeps the flying in-house, with mainline APA pilots.

Hi commavia, good to see you here!

Regarding your comment, if AA can improve scope and increase flying, it will be better for the pilots in the long-run as well as it will allow AA to expand even more to "larger" routes (such as international, major hubs, etc.). Not being able to get the feed (due to costs) is one of many major hindrances for AA to expand.

AA will wait until it completes the Eagle spin-off and adsorb it's debt. Then and only then will AA file BK.

I think that is one way they will go.

Eagle has nothing to do with this -- AMR could file along with AA at any time they wanted to. The debt is already AMR's, and they don't necessarily have to put the Eagle subsidiary into bankruptcy...

While you are correct, having Eagle spun-off would be one less (major) variable to deal with if AA files for BK.

I think you're really a bit ignorant as to why WN is successful, Bob...

They don't need to ask the employees to take responsibility because the unions already know they already share that responsibility with management.

Ask anyone there who has been around for more than a few years, and they fully understand that their success is all about costs and productivity. No featherbedding, no arguing over who should pick up a newspaper off the cabin floor, or who should deal with a problem unfolding in front of them.

I've never heard an employee at WN say "it's not my job". I've seen mechanics throw bags. I've seen clerks help change a tire. And I've seen pilots pick up trash.

The employees there understand that no one workgroup or subset of employees can operate in a vacuum.

Absolutely correct. It would be wise for employee groups to really get together and really negotiate with management. What's happened in the past (i.e. "large management compensation"(that's debatable as well), etc.) can't be changed now. Its "water under the bridge". Its time to move forward and I'm afraid that's not happening.

I don't see how AA will ever come close to replicating that culture. Not without radical change at every level including labor.

Agree!

Give me just half of what the Pilot's get and the lump sum option that most of us piss ants no longer have, and I will gladly pull the ejection handle myself.

We (TWU Members) gave away the farm to protect their sacred cow pension, I hope each and every one of them enjoy the hell out of it while the rest of us peasants and slaves suffer still trying to fund their sacred cow.

NO, on second thought, File Bankruptcy and F'em all

What did you give away? Maybe what you gave away was the fact your salary/pensions was above industry standard? Have you thought about that? Have you thought about the fact maybe you are still getting paid to much compared to the industry? I'm not being facetious, merely bringing up a possibility.

So here we have senior pilots bailing out over an "ANTICIPATED" bankruptcy filing...
So should AA file, what becomes of those pilots who aren't old enough to retire?
How will they fare after a court-abbrogated contracte and SCOPE decimation?

I hope the APA isn't spewing to its members what the TWU is spewing to us...........
Contrary to some of those who believe otherwise, union employees will get a regal hosing in bankruptcy court.

I agree, and that is why I think its better to get this resolved before AA has to into BK, then employees will really get hosed as practically EVERY single analyst data shows that AA's pay/retirement structure is too compared to its peers. When a BK judge sees that, there will be no way he/she will allow the current pay structure to hold.

The only things certain in this life are death and taxes, and oh yes, don't forget, AA executive compensation!

You were doing well until the "compensation" part. AA executives get paid in stocks/stock options. If AA files for BK, that will go basically down to zero.

 

[Jacobin777]

No, they are not. Everyone knows we would get screwed, but the bottom line is THERE IS ABSOLUTELY NOTHING WE CAN DO ABOUT IT. Nobody even cares anymore. This is the company's own fault. They got everything they asked for 8 years ago and they have squandered it through gross mismanagement.

They expect us to just GIVE everything to them? Why would we? We have nothing to gain by just giving away the store. If they are going to eviscerate our contract in BK court then they will have to make their case to the judge.

How did you get "screwed"? If you work for the company then YOU are the part of the company and responsible as well. Don't throw this off to everyone else. You are only fooling yourself and your fellow union friends/collegues.

Let me begin this discussion by categorically stating: your APA Board of Directors remains universally committed to obtaining an INDUSTRY LEADING CONTRACT. Nothing less is acceptable.

Thanks for the info, appreciate it.

"Industry leading contract" sounds great in theory, but as I mentioned above, once a judge sees the disparity in salary/benefits, you can certainly bet that at best, AA's will be "on-par" with rest of the industry.

 

[Bob Owens]

So where do you get the money to put in 20% to get your lost pension back?
You are advocating giving up the defined pension, so you can save 20% over the next 10 years?

Are you going to get us a 20% raise to cover that, or are we talking paycut?

Sounds like a stupid plan.
You are basically saying the defined pension is worth 20% of my pay if one has 10 years to retiement. More if you're older, less is you're younger.
Thanks for finally placing a dollar figure on it.

If you don't mind I would rather keep the defined plan , and stop trying to kill the golden goose or force it into Bankruptcy.
Was that T/A really that bad, now that you put your calculator to the cost of turning it down? You wouldn't rather have the $2.55 line premium than a requirement to save 20% just to match what you are about to lose? Do really think in Bankruptcy the Judge will give you a 20% raise to cover the lost defined pension? I dont!

Could you actually justify every potential negative with this type of logic?

I think you need to read it again. I have no intentions on giving up the pension, only looking at possibilities in the event the company does file BK as a means of going after the pilots.

 

[Buck]

Why can't the middle class just agree to give those not earning as much some relief?

Where do I sign up to raise my taxes?

Is there a way I can just sign my check over to the government and purchase my goods at the government store?

Can I purchase my gasoline at the government pump?