The Pension Benefit Guaranty Corp has been particularly visible since American Airlines filed for bankruptcy reorganization.   Nothing scares PBGC more than an airline in bankruptcy.  Why?  Because that’s how airlines have dumped their pension obligations.  PBGC now holds those liabilities and it really doesn’t want any more coming their way.

American Airlines’ obligations scare PBGC (who is already underfunded) and so PBGC has been shrill in its warnings to AA in the media that they should keep their obligations and work things out with employees.  AA almost seems to be toying with them when it made a token payment into its pensions after bankruptcy filing.  The truth is, I feel almost certain that AA will dump its obligations.  I think they’ll find any argument necessary to justify this and I think PBGC sees the writing on the wall.

AA has been rather disingenuous with its own PR on the subject.  For instance, their claim is that “most” employees would see no loss of benefits.  That turned out not to be quite true.  In fact, about 13% of the work force at AA would see a loss of benefits and the group that takes the substantial hit are the pilots.  Truth be told, I’m kind of on the pilots side on this issue.

Why?  Because the seniority system force them to put all their eggs in one basket when it comes to retirement.  Because of that system, they have no backup plan and a significant reduction in benefits really does hurt them when compared to the investment they’ve made in making a career at the company.  But its those pilots pensions that AA wants out from under the most.

As much as I do feel for labor groups who would lose if AA dropped the pensions and as much as I wish for it to not happen, I think it will.  In fact, I think we’ll see that move in a very short time now.

Filed under: Airline News by ajax