Air- Judge lets American Airlines limit pension payouts, OKs new pilot contract- The Dallas Morning News

Posted: December 20, 2012 in Uncategorized

December 19, 2012

NEW YORK — U.S. Bankruptcy Judge Sean Lane allowed American Airlines Inc. on Wednesday to eliminate a key option on its pension plan, then approved the carrier’s new contract with the Allied Pilots Association.

He also granted the airline six more weeks to file its plan of reorganization with the court.

The contract approval means that American has new labor deals in place with all nine of its bargaining units.

Stephen Karotkin, American bankruptcy attorney, called the new pilot contract a “very, very important milestone’ in the bankruptcy case, and the elimination of the lump-sum pension option was “very, very important” to the successful completion of its financial reorganization.

The airline can now eliminate an option that allowed some retiring pilots to take their defined-benefit pensions as one upfront lump sum. Instead, they’ll have to take their retirement funds as a lifetime annuity.

American had argued that keeping the lump sum raised the possibility that an unacceptably high number of pilots would retire, causing severe operational problems as it trained replacements and hired new pilots.

In agreeing with American, Lane overruled the objections of “Supplement B” pilots — those hired before Nov. 1, 1983 — that they had an unbreakable promise that their benefits would never be reduced, including the right to take their pensions as a lump sum.

American had originally threatened to terminate the pensions and turn them over to the Pension Benefit Guaranty Corp. because of the lump-sum option. With Lane’s ruling Wednesday, American will no longer attempt to void the plans.

Lane’s approval of the new six-year collective bargaining agreement with the Allied Pilots Association came over the objection of former Trans World Airlines pilots and the Supplement B pilots.

The group of ex-TWA pilots opposes the new contract’s provisions on what will happen to the St. Louis-based TWA pilots when American, as expected, closes the pilot base in the city.

A contract supplement in 2001, Supplement CC, had set up protections at the St. Louis base for the ex-TWA pilots and addressed how the TWA pilots would be blended in with the APA seniority list.

The contract ratified Dec. 7 by American pilots would submit the question of what happens to those pilots’ seniority to a three-person panel of arbitrators.

Those supplements were in the previous contract, abrogated by American after Lane gave his permission to let American toss out the old agreement.

Lane said that his role was not to decide grievances. More important, he told the warring parties that the supplements were no longer in effect when the contract that contained them was abrogated.

At Wednesday’s hearing, the judge also granted American and its unsecured creditors an extra six weeks to submit a plan of reorganization.

It is still uncertain whether that plan ultimately will provide for American to emerge from bankruptcy independently or merged with US Airways or another airline.

American had requested the extra six weeks to give the company time to fully consider “strategic alternatives.”

Jack Butler, lead counsel for the unsecured creditors committee, said he expects those deliberations to be completed in the first quarter of 2013.

The parties now have the exclusive right, to March 11, to propose a plan of reorganization, and to May 10 to solicit acceptances from creditors.

The extension was the fourth since the case began Nov. 29, 2011.

Butler was headed to Charlotte, N.C., after the New York hearing adjourned shortly before 2 p.m. Wednesday. Butler, US Airways chairman and CEO Doug Parker and president Scott Kirby were to meet with leaders of the US Airline Pilots Association, the union that represents US Airways pilots, about a possible agreement on a merger with American.

USAPA, US Airways, American and Allied Pilots Association negotiators have been meeting since the two unions signed a nondisclosure agreement and were allowed into confidential merger discussions last week.

“These discussions are aimed at crafting a memorandum of understanding that would serve as an interim agreement while a merger is undertaken,” APA told members in a hotline Wednesday.


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