American Airlines Pension Issue Unites Executives, Unions

At American Airlines, executives and union leaders are joining forces to try to protect the carrier's pension plan from changes in federal law.

In an effort that labor leaders describe as unprecedented, American Airlines executives and union officials are joining forces to sway lawmakers to take steps to secure pensions.

The group hopes to persuade Congress to write new pension rules that will ease the strain on plans like American's. The Fort Worth-based airline owes its pension plans about $2.7 billion and has shelled out hundreds of millions of dollars in payments over the past few years.

The collaboration is the first indication that union leaders and American executives are talking about the airline's pensions.

Many American employees fear that the struggling airline will freeze or terminate the pensions, following the lead of United Airlines, US Airways and Delta Air Lines.

Union leaders say the airline has not asked for any changes to the pensions. And the joint effort seems to indicate that American's executives would rather maintain the pensions, if possible, than jettison the costly plans -- a move that would require either approval from union members or a ruling by a bankruptcy judge.

"This is really unprecedented, and it's very symbolic," said Tommie Hutto-Blake, president of the Association of Professional Flight Attendants, which represents American's flight attendants.

"We're breaking new ground here," agreed Roger Frizzell, American spokesman.

Bankrupt carriers United and US Airways turned their pensions over to the federal government, a move that results in lower payments to retirees. It has also stressed the Pension Benefit Guarantee Corp., the federal agency that takes over failed pension plans.

Delta froze its pilots' pension and replaced it with a 401(k) plan.

"This is a major issue for the pilots," said Ralph Hunter, an American captain who is president of the Allied Pilots Association. Union members voted to approve steep concessions in 2003 "largely to save the pension," he said.

Union leaders and executives are jointly crafting a "position paper" on the issue, which they expect to complete within a few weeks and deliver to Washington.

Union officials and executives wouldn't disclose the proposal's details. Frizzell said it wasn't yet written. "Right now, it's only a conversation," he said. "But I believe it is the right direction to take."

But Hutto-Blake said the effort would focus on protecting companies with stronger plans, such as American's.

"What we really want here is safeguards for companies with well funds," Hutto-Blake said. "The driver right now in Washington is focused on the sick funds."

The two sides also plan to join forces in lobbying members of Congress, union leaders said -- something that rarely happens at American, where labor and management have often been on opposing sides of the issues.

A proposal released by the White House this year would require airlines to pay off their fund imbalances within seven years.

That's more lenient than the present law, which requires shortfalls to be paid within three to five years. But many airlines want that extended to 20 years to stretch out the payment burden.

In addition, the Bush plan would require companies with weak credit ratings to pay higher premiums to the federal pension agency in an effort to shore up its finances.

The agency is in danger of defaulting under the strain of abandoned pensions, which could mean a big taxpayer bailout.

But that would mean hefty new obligations for all of the major airlines, including American, which have poor credit ratings because of their heavy losses since 2000.

American executives point out that their pension plan is stronger than most other airlines' plans. It's 80 percent funded and has made all required payments during the last two years.

The carrier paid $461 million in pension payments last year, and it is expected to pay more than $300 million in 2005.