DALLAS — American Airlines' pension programs for its employees are about $10 billion in the red. In other words, the company is committed to pay $10 billion more to current and former workers than it has set aside.
What happens next?
American wants to terminate all of its pension plans, and it will ask the bankruptcy court to approve.
If that happens, the Pension Benefit Guaranty Corp. (PBGC) will be called on to take over management of the plan.
"When PBGC takes over a plan — and if we have to, we absolutely will — we pay benefits, but those benefits are not as good as the ones American's already committed," explained PBGC spokesman Josh Gotbaum. "We don't pay health insurance, and there's a cap on the amount we can pay for pensions."
The PBGC has a $54,000 annual cap on what it can pay an individual; that's about $4,500 a month. That's less than a lot of American employees had been counting on.
American wants to eliminate health coverage for retirees and to establish a 401 k plan, which means employees would pay for their own retirement funds from here on out.
If the court approves this plan, the pension would become a creditor — just like all the others to whom American owes money.
But the PBGC will fight all this in bankruptcy court. It could be that the pension plan will end up owning stock what emerges as the post-bankruptcy American Airlines.