Feb. 24-- A bankruptcy judge is being asked by AMR Corp. and creditors to deny requests by retirees for representation on the committee of unsecured creditors in the company's bankruptcy case, court documents show.
In responses filed this week in U.S. Bankruptcy Court for the Southern District of New York, lawyers for AMR, the committee of unsecured creditors, pilot retiree members of the Grey Eagles Inc. and retired employee members of AMRRC Inc. ask the court to deny motions for representation on the committee of unsecured creditors by AMR Retirees Pension Protection Corp. and the Ad Hoc Committee of Passenger Service Agents.
The AMR Retirees and the Ad Hoc Committee have asked Judge Sean Lane for appointment to the committee of unsecured creditors to protect the rights and benefits of AMR retirees.
The committee of unsecured creditors includes representatives of American's Allied Pilots Association, Association of Professional Flight Attendants, Transport Workers Union, the Bank of New York Mellon, Boeing Capital Corp., Hewlett Packard Enterprise Services LLC, Manufacturers and Traders Trust Co., Wilmington Trust Co. and the Pension Benefit Guaranty Corp.
AMR, the parent of American Airlines, said it intends to terminate its four defined benefit pension plans as part of $2 billion a year in cost reductions it needs to emerge from bankruptcy and compete successfully in the airline industry.
Lawyers for AMR, however, said it is premature at this point to appoint a retirees committee.
"AMR has not initiated any proceedings pursuant to Section 1114 of the bankruptcy code to deal with retiree benefits," AMR's lawyers said in their response to the motions by retirees. "No proposal has been made to such retirees. AMR is still in the process of analyzing and formulating proposals that may be necessary depending upon the outcome of the pending labor negotiations. That outcome may shape any proposal that, ultimately, may be made."
AMR's lawyers say that if and when the company determines it must modify pensions or retiree benefits, there will be ample time for the appointment of a broad-based retirees committee.
"Until that time, it is not necessary to impose additional and incremental expenses on AMR for committee members and the professionals the retirees committee would engage," AMR's lawyers say. "The debtors have paid, and will continue to pay, retiree benefits. ... As a consequence, there is no prejudice to retirees by deferring the appointment of a retirees committee to a future time when the issues my have crystallized."
Lawyers for the committee of unsecured creditors have filed a limited objection to the motions by AMR Retirees and the Ad Hoc Committee.
The committee "requests only that a single retiree committee be appointed to serve as the "authorized representative" for retirees whose...benefits may be modified," the committee's lawyers say. "A single retiree committee, populated by a small but diverse group of representatives, including, without limitation, representatives of those unions willing to serve as the authorized representatives of retirees formerly affiliated with their union, would adequately represent both non-union and union retirees."
Lawyers for the Grey Eagles, like AMR, say appointment of a retirees committee is premature because the company has not yet filed a motion to modify any retiree rights or benefits.
In addition, lawyers for the Grey Eagles say, deferring appointment of a retirees committee is appropriate "because it is currently unclear which retirees' benefits the debtors may seek to modify, the scope of any such proposed modifications, or whether any of the unions will represent their retirees; this court cannot determine which constituencies need to be represented on a retiree committee."
Lawyers for AMRRC, which represents more than 1,500 retirees, say they support the immediate appointment of a retiree committee to protect health, prescription drug, insurance and related benefits that thousands of retirees rely on.
The retiree committee, however, should be broadly representative of the retirees it represents "and not drawn exclusively from the steering committee of an organization (AMR Retirees Pension Protection Corp.) formed to protect the pensions of former management," lawyers for AMRRC say.
Immediate appointment of a retirees committee is appropriate because it will allow the committee to do the preliminary work necessary to set up benefits eligible for the 72.5 percent federal subsidy in the form of the Health Coverage Tax Credit, AMRRC's lawyers say.
"To the extent the debtors are able to terminate one or more of their pension plans, the affected retirees would become eligible for the Health Coverage Tax Credit, a federal subsidy paying 72.5 percent of the cost of eligible health care, prescription drug, vision care and dental benefits if those benefits are set up by a retiree committee," AMRRC's lawyers say in their response.
"The HCTC is an unusual tax credit because instead of being paid to the taxpayer only at the end of the year, the eligible retirees can participate in a monthly reimbursement program, the IRS HCTC advance payment program, which pays a portion of the premium each month for the health-care benefits of eligible retirees (and their spouses and dependents) enrolled in "qualified health insurance."
AMRRC's lawyers, who represented Delta Air Lines' retirees in Delta's bankruptcy, say it takes months to set up such a program so the sooner a retirees committee is appointed, the more likely a successful retiree benefits program can be established.
Lane will hear lawyers' arguments for and against establishment of a retirees committee on Wednesday.
D.R. Stewart 918-581-8451
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