Employees, retirees, other airlines closely watching AMR bankruptcy

Print
Email
|

by BYRON HARRIS

Bio | Email

WFAA

Posted on January 27, 2012 at 12:31 AM

Updated Friday, Jan 27 at 8:27 AM

DALLAS - A major day in bankruptcy court has been postponed for American Airlines.

A New York judge has put off key arguments over AMR's proposal to hire consultants until next month. The overriding questions though, haven't changed.

Who gets what assets? And what will the airline look like when it emerges?

"Bankruptcy is hard. It's hard on companies. It's hard on employees. It's very hard on our retirees," said Josh Gotbaum of the Pension Benefit Guaranty Corporation (PBGC).

He knows how difficult airline restructuring can be. He ran Hawaiian Airlines, a much smaller carrier than American, as a trustee during its bankruptcy.

American's 80,000 current employees and 50,000 retirees are anxiously waiting to see if the company will break its pension promises to them.

Last year, the airline fell short on its contributions to plans.

Although the PBGC insures pensions, it has a limit of $54,000 per year, per employee. And it does not provide health coverage.

So Gotbaum does not want to see American default on its pensions.

"Nobody should walk away from commitments to 130,000 [people] just because it's convenient," he said.

Commitments go far beyond employees, of course.

American leases the lion's share of four out of D/FW Airport's five terminals - a lot of concrete and debt.

"They probably represent, between them and American Eagle, about 80 percent of our total traffic," said Jeff Fegan, the airport's CEO.

So how much smaller will the airline be after Chapter 11?

Aviation consultant Michael Boyd says size is not American's problem.

"They don't need Chapter 11 to shrink," Boyd said. "What they need to do is get their costs in line. So in terms of the size of American Airlines, it'll be at least the size it is today, but far more efficient."

And until it settles down a potential takeover target.

U.s. Airways and Delta are both looking at a takeover. But more certain as a bigger partner is British Airways, which already has operating agreements with American on intercontinental flights.

"It's certainly in the cards," Boyd said. "The reality is, the airline industry is becoming global. So the number of flights into Amarillo 10 years from now might be decided in an office in Brussels."

Some airlines have taken more than three years to emerge from Chapter 11. Boyd expects American to take no longer than 18 months.

E-mail bharris@wfaa.com

Print
Email
|