AA Bankruptcy Q&A from the TWU ATD

As a safeguard against the risk that a defined benefit pension plan may contain insufficient funds to pay the promised benefits to workers upon retirement, a federal statute, ERISA, imposes minimum funding standards on plan sponsors. ERISA also established a pension insurance program that guarantees that retirees receive at least some of their earned benefits if and when an employer terminated an under-funded defined benefit plan. The Pension Benefit Guaranty Corporation (“PBGC”) administers the pension insurance program. If a pension plan has insufficient assets to pay benefits, regardless of whether the plan sponsor is in bankruptcy, the PBGC will either provide financial assistance to the plan to enable it to pay certain guaranteed benefits or take over the plan and pay benefits directly to beneficiaries, up to a statutory maximum. For plans terminated in 2011, the PBGC’s maximum benefit amount is $4,500 per month ($54,000 per year).

An employer’s bankruptcy filing does not immediately affect the status of its collective bargaining agreement with the Union. All of the contract’s provisions continue to govern the debtor’s post-filing obligations to Union employees, including the applicable grievance procedures.
Under section 1113 of the Bankruptcy Code, the bankruptcy court may authorize an employer to reject—and thus terminate—a collective bargaining agreement if the debtor can prove to the bankruptcy court that
1. it proposed modifications to the collective bargaining agreement to the union;
2. the proposed modifications are necessary to permit the debtor’s reorganization;
3. the debtor met with the union and shared information justifying the proposed modifications;
4. the debtor negotiated in good faith with the union; and
5. the union refused to accept the proposal modifications without good cause.
What modifications are “necessary” is not defined by the Bankruptcy Code, and courts use varying definitions. Essentially, however, section 1113 requires your employer to negotiate with the Union in good faith to modify its collective bargaining agreement before seeking authority to reject the contract.
If your employer successfully rejects its collective bargaining agreement, the Union remains your authorized representative, and the company must comply with applicable labor laws and continue to bargain with the Union in good faith.

If you are entitled to benefits under more than one plan assumed by the PBGC, you may not be entitled to the full amount you would have been entitled to under each of those plans separately. Rather, there may be a further limit on the total amount of PBGC benefits that an individual can receive even if the benefits are paid under different pension plans that have been assumed by the PBGC. The limit is determined on a case-by-case basis in the PBGC’s discretion and depends on how much has been paid by the PBGC to an individual under all eligible plans.

Under Bankruptcy Code section 1113 CBAs will be negotiated among the company and the TWU, with any revisions being subject to approval of the members who are in good standing with the TWU. However, if an agreement is not ratified prior to the Bankruptcy Court issuing a decision on the section 1113 motion, the Bankruptcy Court decides whether to grant or deny the company’s motion, but will not rewrite the CBA. Before the court makes that decision the TWU intends to give its members the opportunity to vote on the company’s last proposal, even if the TWU and the company have not reached agreement on a TA.

Representatives of the TWU will lead the efforts in connection with all negotiations and other matters in the AA chapter 11 cases. Counsel will provide legal advice and other assistance, as requested by the representatives.

Yes, all members of each contract group who are in good standing with the TWU are entitled to vote to approve or reject proposed modifications to the CBAs. Any modifications must be approved by a majority of the members affected by the CBA in question.

All retirees will receive notice if AMR intends to terminate the pension plans. The amount of such notice is dependent on certain factors, but the amount of notice will be approximately 45 to 60 days. Once the PBGC assumes control of the terminated plans, retirees entitled to benefits will receive a separate notice of benefits directly from the PBGC. There may be a lag in the delivery of pension checks as the PBGC assumes control, but the PBGC has historically endeavored to effect a seamless transition to limit the interruption of benefits.

Yes, these refunds will be made promptly upon the member’s resignation.

AMR can apply to the Bankruptcy Court for approval to terminate its pension plans.

All current benefits are available to members choosing to retire now. However, these benefits could be altered or terminated if AMR receives Bankruptcy Court approval to terminate its pension plans.

No, until the CBAs are modified or rejected, all elements of the CBAs remain in full force and effect. However, any grievances that were commenced or relate to matters that first arose before AMR filed for bankruptcy may be subject to the automatic stay of the Bankruptcy Code. This means that those grievances will not proceed as they would have outside of bankruptcy.

A merger with another airline is a possibility. We are monitoring all issues, including potential merger transactions, but it is too early to know if there will be a merger.