Amid the chaos and conflict of American Airlines' bankruptcy negotations, an unlikely hero has emerged – one who's ended up effectively holding the airline to its obligations, rather than dumping them on taxpayers.
A recent Wall Street Journal article shines the spotlight on Pension Benefit Guarantee Corporation director Josh Gotbaum and his efforts to keep his somewhat obscure (at least to the outside world) agency from shouldering the burden as American attempted to dump its pension plans as a cost-saving move.
All totaled, American's pension obligations would have saddled the PBGC with an unwieldy $9 billion, a cost that would have raised the organization's deficit by a third.
Recommended For You
The WSJ notes that Gotbaum's none-to-subtle messages may have hit home with the airline, as it's now scrambling to work out a better deal with potential suitors (US Airways) and its unions … and has stepped away from its original plan to dump its pension problems, like an orphan abandoned at a fire station.
Gotbaum's relatively tough talk (for a PBGC director) likely stems from his experiences seeing the serious downside of a massive pension default; as the article mentions, eight of the 10 biggest disasters to befall the PBGC have occurred in the last decade, and almost all of them are related to either the long-decaying steel industry or the equally troubled airline sector.
There's been talk of modifying the pension discount system and raising rates for premiums, in an effort to kick-start pension contributions among major employers – many of whom would rather put their free cash into job creation, not intensely low-yield pension accounts – but the issue was loaded into the back end of the highways bill and support is waning. As you've seen that even long-established tax incentives for retirement plans are ripe for election-year cost-saving cherry picking.
Gotbaum, a two-year veteran at the post, isn't without his criticisms: his background in private equity and even as a Justice Department trustee in the Hawaiian Airlines bankruptcy have been controversial.
But given the current economic climate and the far-reaching fallout if American Airlines were to take the easy way out, maybe it's not so bad to ruffle some feathers. The American taxpayers, whether they know it or not, can thank him for that.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
