American Airlines wants to backtrack on promises made to retirees

Source: Fort Worth Star-Telegram
Author: Andrea Ahles

American Airlines’ parent company, AMR Corp., wants to change its healthcare and life insurance benefits for its retirees unilaterally, the company said Friday.

In a filing, the Fort Worth-based company asked the bankruptcy court to allow it to change its retiree benefits as it tries to reduce its costs in bankruptcy. The company argues that it did not guarantee retiree health and life insurance benefits for life.

“The restructuring process is difficult for everyone affected, and we understand any changes to these benefits are concerning to our retirees,” spokesman Bruce Hicks said. “It’s important to remember, the changes we’re proposing are very similar to those we propose to make for active employees when they retire and we are the last legacy carrier that has gone through this process.”

In 2010, AMR said its liability for retiree benefits for people who had careers as American workers was $1.2 billion and an additional $111 million for former TWA employees. AMR has about 40,000 retirees.

Previously, American altered retiree medical benefits for nonunion employees over 65, ending plans that the company had partially paid for in 2009 and providing supplemental Medicaid plans where retirees paid 100 percent of the premium. During the bankruptcy proceedings, American has included changes in union retiree benefits in contract negotiations with its three largest unions.

Meanwhile, American and its flight attendants union both said progress has been made in three days of talks as they try to reach a contract agreement.

Laura Glading, president of the Association of Professional Flight Attendants, briefed her union board Friday but has not released details of the negotiations to other union members.

Talks will continue next week, Hicks said.

“We met this week with APFA and had three days of productive bargaining,” Hicks said.

AMR wants to win concessions from its major unions in new labor deals before a bankruptcy judge rules on its request to terminate existing contracts. The pilots have agreed to vote on the carrier’s latest offer, and talks with mechanics and store clerks are scheduled to resume Monday.

Originally, American proposed cutting 2,300 flight attendant jobs and increasing work hours while offering 1.5 percent raises in each year of the new contract. But the details have changed since American lowered its cost-cutting targets for each work group from 20 percent to 17 percent after the three largest unions agreed to support a merger with US Airways.

With American asking the bankruptcy court to extend until the end of the year its exclusivity period to file a restructuring plan, a takeover bid by US Airways likely won’t come until next year.

Bond analyst Vicki Bryan of Gimme Credit questioned whether US Airways could deliver on the promises it has made to American’s unions but said she doubts that American’s current restructuring proposals will be enough to turn the carrier around.

“The plan it has cobbled together has yet to convince us that this management team is capable of restoring the company to prosperity. Just slashing costs again won’t solve AMR’s problems,” Bryan wrote in a research note to investors Friday.

“As we have said, any cost structure crafted today will be too expensive again down the road unless management can restore sustainable, lucrative top line growth, which is what AMR failed to do after its last brush with bankruptcy in 2003.”

Andrea Ahles, 817-390-7631

Twitter: @Sky_Talk

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