The Pension Benefit Guaranty Corp. said it has placed liens on some of American Airlines’ assets in Texas and overseas since the carrier did not make its full $100 million pension payment due in January.
The agency said it filed over 70 liens, totalling $91.7 million, on behalf of the four pension plans that American has.
The carrier made only a $6.5 million payment on January 15 instead of its full pension payment. At the time the Fort Worth-based airline said the partial payment allowed the company to preserve its cash during the bankruptcy process.
“That’s what we can do in order to protect the integrity of the ongoing contributions that companies are required to make,” said PBGC director Josh Gotbaum on Tuesday. “It does nothing to change the fact that American is also getting ready to propose that its pension plans be terminated.”
The PBGC, which insures pensions based on employer contributions, has been publicly challenging American to keep its pensions ever since the airline filed for bankruptcy Nov. 29.
The agency said that American has made 37 years of premium payments to PBGC totalling $260 million to cover its pensions in the event the plans would be terminated. Gotbaum said that those payments cover the $9 billion in pension benefits that the PBGC will have to fund if the plans are terminated.
The PBGC estimates that American has $8 billion in assets in its pension plans to fund $18 billion in pension obligations, meaning there is a shortfall of $10 billion. Since the PBGC has maximum pension payouts, about $1 billion of the shortfall will not be covered.
Gotbaum pointed out that American and its labor unions lobbied Congress three years ago to get its pension funding requirements reduced, which Congress granted, reducing American’s obligations by about $1 billion. When American filed for bankruptcy, the company stated it had $4 billion in cash on hand to use during the reorganization process.
“The case, if you will, that 130,000 people to have their pensions killed in order for American to survive is not a strong case,” Gotbaum said.