Issues abound in American Airlines 'mega-bankruptcy'

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by BYRON HARRIS

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WFAA

Posted on December 20, 2011 at 8:11 PM

FORT WORTH — The term for American Airlines' financial situation is a "mega-bankruptcy."

Virtually every day, claims are coming in. The court has to determine not only the validity of those claims, but the order in which they will be addressed.

Lately, Puerto Rico wants $2 million for electricity and Weber Aircraft in Gainesville wants more than $3 million for airplane seats from AMR Corp., American's parent company.

The biggest claim — as far as American's employees are concerned — is their pensions.

"Right now, the pension fund is underfunded by at least $4 billion," AMR's lead bankruptcy attorney Harvey Miller told Bloomberg News. "It's a defined benefit plan. Defined benefit plans simply can't work."

In employee language, that means going forward, employees who formerly had guaranteed monthly pensions will now have to contribute to 401k plans.

The Pension Benefit Guaranty Corportation (PBGC) will have to make up the difference between what is owed to employees and what's in the bank.

"The PBGC is not going to be happy. The retirees are not going to be happy. But we have to face economic reality," Miller told Bloomberg.

Miller said the he hopes to wrap up bankruptcy proceedings in less than a year, which might be a record for a $29 billion case.

American said: "We have not filed any pension-related documents with the Court, nor have we discussed pensions during any Court proceedings."

E-mail bharris@wfaa.com

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