Source: Dallas News
Author: Terry Maxon

The impact of bankruptcy is moving rapidly from hypothetical to real for American Airlines Inc. employees.

Company officials have informed employees that American will freeze their pensions on Nov. 1, stop paying medical insurance premiums for employees who retire on that date or afterward and implement other parts of their concessionary contracts.

Some elements will be implemented earlier, and some, like new medical insurance programs with higher premiums or deductions, go into effect Jan. 1. Some changes, like new schedule bidding systems for pilots and flight attendants, are further in the future.

The pension freeze isn’t a surprise — American has stated its intent to do so since March. But the effective date couldn’t be set until the new labor contracts were finalized.

The changes are cascading from Wednesday’s decision by U.S. Bankruptcy Judge Sean Lane to let American implement the last three union contracts that employees had ratified. After that decision, the Fort Worth-based carrier moved quickly to inform its employees of what comes next.

Several of the contracts that bargaining units approved in May and August included pay raises effective on the day the contracts are signed.

Active members of the Association of Professional Flight Attendants will receive a $1,500 signing bonus next week and a 3 percent annual raise. Mechanics and related employees, represented by the Transport Workers Union, also are to get a 3 percent raise, and “maintenance control technicians,” who advise on maintenance issues, will get a 3.4 percent increase.

Five other TWU-represented groups won’t get their next raise until Sept. 12, 2013, 12 months from the date of signing.

Employees will accrue pension benefits through Oct. 31, but nothing after that. Except for Allied Pilots Association members, American will then match an employee’s contributions to a 401(k) plan up to 5.5 percent of the employee’s earnings.

For the time being, American won’t contribute anything to pilots’ 401(k) plans.

American’s pilots rejected a tentative contract agreement on Aug. 8 under which American would have contributed an amount equal to 14 percent of a pilot’s earnings to a 401(k) plan.

American instead is implementing elements of an April 19 “term sheet” that outlined changes to the pilots’ pay, benefits and working conditions. The term sheet proposed a 13.5 percent contribution to the pilots’ 401(k) plans, but American made it contingent upon the pilots’ approval of a consensual deal.

“Similar to other employee groups, pilot pension benefits will continue status quo through October 31; as we don’t yet have a consensual agreement with the APA, replacement plan details will be determined at a later date,” Denise Lynn, American’s senior vice president of people, wrote in a letter to employees.

The pilots actually have two retirement plans: the A Plan, a defined-benefit plan, and the B Plan, a defined-contribution plan in which American now puts in an amount equal to 11 percent of a pilot’s pay.

American intends to freeze the A Plan if it can get regulatory approval of its proposal to bar pilots from taking their pensions in lump sums. Otherwise, it will terminate the plan and have the Pension Benefit Guaranty Corp. take over, an act that would greatly reduce the average pilot’s pension.

The B Plan will also be frozen as of Nov. 1 and terminated as of Nov. 30. The money in their accounts will be distributed to pilots in May 2013.

Employees in several bargaining units have been weighing early-out options that would give them bonuses to leave, from $12,500 for some TWU employees to $40,000 for flight attendants with at least 15 years’ service.

At last count, more than 1,300 flight attendants have signed up for the early-out program. American has set a deadline of 11 p.m. Thursday for flight attendants to apply.