Nearly 300 American Airlines employees gathered on Capitol Hill yesterday to lobby for more time for the world's largest airline to fund...
WASHINGTON — Nearly 300 American Airlines employees gathered on Capitol Hill yesterday to lobby for more time for the world’s largest airline to fund its pension plan amid a flurry of retirement legislation.
They’re also attempting to prove that an old-fashioned defined benefit plan is a viable retirement option, as rival airlines are attempting to freeze or dump their old plans and start modern 401(k)-style plans.
Executives said if Congress doesn’t help, American’s pension plans will be in jeopardy.
Meanwhile, representatives from other big airlines testified before a congressional committee yesterday on the state of airline pensions.
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Some of those witnesses, including a Delta Air Lines executive, proposed a plan for more time to fund defined benefit pension plans, so long as airlines freeze those old-fashioned plans.
That’s exactly what American Chief Executive Gerard Arpey promised he wouldn’t do when he negotiated pay cuts in 2003 that kept the airline out of bankruptcy. But this week, Arpey said for the first time he cannot guarantee the pensions will remain intact.
Arpey said keeping the defined benefit pensions is contingent upon Congress passing new legislation and American moving toward profitability.
Arpey said the airline will “hopefully maintain our defined benefit plans,” and there’s a “very good chance of returning the plans to their historic fully-funded status.”
Like other legacy carriers, American faces big pension payments beginning in 2007, said William Ris, senior vice president of government affairs for the airline.
If Congress doesn’t pass legislation this year allowing airlines extra time to fund their defined benefit plans, “We’ll be facing next year some really tough decisions about whether we can make it through the next couple of years” with the pension plan intact, Ris said. “We’d be facing a really big cash requirement in 2007.”
Ris declined to speculate exactly how large that requirement might be, but he said it would be “significantly” larger than what AMR has been paying on average each year for the past few years, around $400 million to $500 million.
Ris and the American employees are asking Congress to pass legislation that would give the company 10 years to fund its pensions by 90 percent and 15 years to fully fund the plans. They support a bill introduced by Rep. John Boehner, R-Ohio, with modifications. As it stands, the bill would give the airline only seven years to fund its plans.
Delta Air Lines and Northwest Airlines also have been stumping for legislation that would give airlines more time to fully fund their plans, which are underfunded by billions of dollars. But Delta has already frozen its defined benefit pension plan, and Northwest is attempting to do the same.