Wednesday, February 1, 2012

Occupy this - PBGC getting ready to take on AMR

A fight to prevent another bailout in the US is on. No, not the banks or autos or insurance companies. It's a fight over the bailout of AMR's employee pension. This is not news - we've discussed this issue back in November. What's new today is that Pension Benefit Guaranty Corporation - PBGC (the taxpayer) wants to step in to prevent the pension bailout that AMR will likely attempt as part of its bankruptcy strategy.
Joshua Gotbaum
NYT: While American [Airlines] has not said it intends to force the government to take over its pension plans, Joshua Gotbaum, director of the Pension Benefit Guaranty Corporation, said he was hoping to get out in front of any such move by the airline. The agency is already operating with a $23 billion deficit and has said it would bear an additional $9 billion loss if American terminated all four of its employees’ plans, which cover 130,000 people.
One thing to keep in mind is that legally AMR can indeed dump the pension. It is a subordinated liability of the firm and without the US taxpayer support, the pension beneficiaries could find themselves in line behind the AMR bond holders in a bankruptcy court. Obviously AMR has a reputational and labor problems if it proceeds. The most likely scenario however is that the firm will trade keeping the pension in return for union concessions on pay and benefits.

So where are all the Occupy AMR these days?
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