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So, You Think Your Pension Fund Is Safe. Surprise!

Written by Gary North on February 3, 2012

Employees of American Airlines worked for years on the assumption that they would receive a pension. But that legal obligation may not survive America Airlines’ bankruptcy.

Companies and cities see this as a way out. They can drive a hard bargain with unions. Who do you think unions worry about most? Existing workers or retired workers?

The unions may fight. But how can they win? Once a firm declares bankruptcy, it can tell workers, “Accept our offer or else find a new career.”


The parent of American Airlines wants to eliminate about 13,000 jobs — 15 percent of its workforce — as the nation’s third-biggest airline remakes itself under bankruptcy protection.

The company proposes to end its traditional pension plans, a move strongly opposed by the airline’s unions and the U.S. pension-insurance agency, and to stop paying for retiree health benefits.

AMR Corp. said Wednesday that it must cut labor costs by 20 percent. It will soon begin negotiations with its three major unions, but the president of the flight attendants’ union quickly rejected the company’s ideas as unacceptably harsh.

CEO Thomas W. Horton said Wednesday that the company hopes to return to profitability by cutting spending by more than $2 billion per year and raising revenue by $1 billion per year. . . .

“We are going to use the restructuring process to make the necessary changes to meet our challenges head-on and capitalize fully on the solid foundation we’ve put in place,” Horton said in a letter to employees.

AMR’s 88,000 employees have braced for bad news for weeks. AMR, American and short-haul affiliate American Eagle filed for bankruptcy protection in November. Horton said in December that the company would emerge from bankruptcy with fewer workers.

Laura Glading, president of the Association of Professional Flight Attendants, said the proposal was more drastic than she expected. She claimed that the annual reduction in employee costs, which AMR put at $1.25 billion, would be closer to $2.8 billion.

“This is an absolute outrage,” Glading said. “There’s nothing in here that’s remotely acceptable.”

Transport Workers Association President James Little declared, “We’re going to fight this.” His union represents American’s mechanics and bag handlers, who would be hit hardest — 40 percent would be laid off. . . .

If American and its three unions can’t agree on changes, the company could ask a bankruptcy judge in New York to throw out existing labor contracts and impose the company’s conditions on workers. Federal law requires the company to first make a good-faith effort to negotiate agreements with its workers. . . .

The company also wants union approval to drop its traditional pension plans, which cover 130,000 employees and retirees. It would replace them with 401(k)-type plans under which the company contributes to workers’ retirement accounts. . . .

American said the cost of traditional pensions and retiree health benefits saddled AMR with higher labor costs than its rivals. Through the first nine months of 2011, labor was 29 percent of operating costs at AMR compared with 22 percent at United and 20 percent at Delta. . . .

It gets worse. Read the full story.

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14 thoughts on “So, You Think Your Pension Fund Is Safe. Surprise!

  1. I doubt any of the cops beating back the Occupy Wall Street protestors with nightsticks, water cannons and pain ray, realize the robber barons the OWS movement opposes stole the public employee pension funds too.

  2. Good.Why should ex employees be getting retirement money from present earnings when they don't even work there anymore? They should'nt. Their retirement money should be put away while they work. It's over union people. Stay tuned.

  3. Obama & Hillary fight it out.
    Who will win? http://www.miniclip.com/games/street-fight/en/

  4. Steve,
    Maybe the retirees shouldn't receive from present earnings, BUT an agreement is an agreement. They retirees lived up to their end. The company should live up to their promises. It's too late for retirees to recover, make up the loss.

  5. The unions have held American businesses hostage for years just like they have held the public sector, municipal and teacher groups hostage over the citizens of their community. It is never about the "children" unless you talking exclusively about their children. It's not about the public, it is always what is in their best interest, not yours. If you happen to be a beneficiary so be it but it is never their first priority. This has to stop unless you want them to take every cent you earn. Airlines have never made money. The cost, some of which are due to union wages in making the planes need to be depreciated in order to lose as little as possible. The federal, municipal, and union members need to all be contributing to 401k type plans with a small contribution from their employer. The gravy train must end now.

  6. […] Read More at the Tea Party Economist By Gary North, Tea Party Economist […]

  7. No Pension Fund OR IRA account is safe from criminals on a plunder binge.

  8. Tired Of Lies says:

    The Tea Party members are the ones putting their people in office and therby allowing this stuff to happen. The rich take jobs away from Americans, then give the same jobs to foreign countries with low wages. And you call yourselves patriots. What a joke.

  9. Truth Prevails says:

    That's your Tea Party, dude.

  10. Talking to a moron says:

    The Tea Parties fault? Really….really?????? LOL, you are a complete idiot!

  11. Nah, probly an A student/professor in a nice government school/university. Dewey & the Prussion system are an almost complete success, except for us funny Patriots.

  12. If I remember correctly it is your President who says we have to bring in people from other countries to work here because we are not smart enough to handle the jobs that are available here.

  13. […] Read More at the Tea Party Economist By Gary North, Tea Party Economist […]