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American Airlines employees hurt by bankruptcy

Mitchell Hartman Mar 8, 2012

Jeremy Hobson: The parent company of American Airlines is trying to cut costs so it can emerge from bankruptcy protection. And one of the ideas that had been floated is eliminating pension programs for workers. But now the airline is backing away from that idea.

Marketplace’s Mitchell Hartman reports on what all this means for the company’s workforce.

Mitchell Hartman: When a company files for bankruptcy, it puts its finances in the hands of a court. If the court gives permission to “terminate” the retirement plans, the government’s Pension Benefit Guaranty Corporation has to pay out pension checks to retirees. The problem here for workers — the government doesn’t pay out all the benefits that were originally promised.

So, if American gets support from its labor unions to freeze — rather than terminate — their pensions, that’ll be good for the company’s 130,000 workers and retirees, says airline analyst Richard Aboulafia.

Richard Aboulafia: It certainly beats the fate of other workers in other airlines that had gone through the process, where they had their existing pensions completely destroyed and they had to go to the Pension Benefit Guaranty Board instead.

United, Delta, and U.S. Airways all successfully shed their pension plans through bankruptcy. That left more than a 100,000 workers and retirees with retirement checks that were, in some cases, 50 percent lower than what was originally promised.

I’m Mitchell Hartman for Marketplace.

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