Coverage of the merger between American Airlines and US Airways

AA Agrees to Freeze Pensions for Most Employees

Airline says it still must reach agreement on pilots' pensions

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    An American Airlines plane parks at the terminal after arriving at the Oakland International Airport November 2, 2007 in Oakland.

    American Airlines agreed on Wednesday to freeze instead of terminate pensions for most employees but warned union leaders the time to negotiate would soon end.

    "I think it should be positive all the way around,” said company spokesman Bruce Hicks.

    The move is the first sign of progress after months of turbulance between the company and its labor unions.

    "The real issue we have to deal with yet is the pilots," Hicks said. "But the other employees, including our nonunion employees, our management and others who might have been affected, I think it is all good news."

    American declared bankruptcy Nov. 29. Fort Worth-based AMR had proposed terminating the plans for all employees and transferring liabilities to the U.S. Pension Benefit Guaranty Corporation. The move would have resulted in a $10 billion deficit to the agency.

    The Transport Workers Union said the airline also agreed to drop its demand for an additional $600 to $800 million in concessions the company said would be needed to cover the cost of the freeze.

    “We are not out of the woods, and we can’t implement the pension plan freeze until we reach an overall agreement. But this is a very important step forward," TWU International President James C. Little said.

    American Airlines said pilots are a unique group because their pension plan allows them to take large lump-sum payments when they retire, in addition to monthly payments.

    Pilots acknowledge the bankruptcy process will likely pressure them to give up their one-time payments -- in exchange for salvaging other parts of their pension.

    "For many reasons, it's just expected that the lump-sum option would not be a consideration,” said First Officer Howie Schack of the Allied Pilots Association.

    Schack cautioned negotiators have a long way to go before reaching an overall deal.

    "Being optimistic is hard to do today, but we are awfully hopeful that for the well-being of the airline, that we can reach a consensual agreement,” he said.

    Laura Glading, president of the Association of Professional Flight Attendants, said the company’s decision to freeze pensions is “a small first step towards compromise.”

    But she also accused American of not negotiating in good faith.

    "They are absolutely just going through the motions,” Glading said. “I do not believe they want to come to a consensual agreement."

    The company says the clock is ticking on talks with labor groups.

    "We haven't set a deadline, [but] it's coming soon,” Hicks said. “The time is running out for us. We can't keep dragging on. We must make progress. We must make the consensual agreements soon."

    Hicks declined to specify a time frame but said the airline would ask the bankruptcy judge to impose the cuts it wants if it can’t reach deals with the unions soon.

    In January, the airline underpaid into the pension plans, contributing only $6.5 million of the $100 million it was to contribute.

    NBC 5's Frank Heinz contributed to this report.

    American Airlines Bankruptcy:
    Find complete coverage of the American Airlines bankruptcy proceedings, expert analysis and impact to customers and the local economy in our special section. Click here for more.


    American Airlines Merger:
    Complete coverage of the merger between American Airlines and US Airways into the newly-formed Fort Worth-based company, American Airlines Group (AAL). Click here for more.