A judge handling the ongoing bankruptcy of American Airlines Inc. and its parent company has approved a plan to modify the way retiring pilots can receive their pension benefits – as well as approving the airline's new contract with existing pilots.
The Dallas Morning News reports that U.S. Bankruptcy Judge Sean Lane approved a deal Wednesday which will eliminate an option that allowed some retiring pilots to receive the bulk of their pension benefits in one costly lump-sum payment.
Under the deal, those retirees will have to take their funds as a lifetime annuity payment.
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The airline had protested the existing arrangement, fearing that a large number of pilots would take the early exit and create gigantic cash-flow issues for the still-embattled airline.
By siding with the airline, the judge overruled the protests of pilots hired before Nov. 1, 1983, who said that they had an unbreakable promise that their benefits would never be reduced, including those lump-sum retirement opportunities.
While the decision will mean a significant change for many retiring pilots, the deal is probably preferable to American's original plans to terminate its pensions entirely and transfer the responsibilites to the federal PBGC.
PBGC boss Josh Gotbaum became personally involved in American's case over the course of the year; as a result of Wednesday's decision, the airline says it will no longer attempt to nullify the pension plans.
A new six-year collective bargaining agreement with the Allied Pilots Association was also signed. Lane also granted American and its unsecured creditors an extra six weeks to resubmit their corporate reorganization plans.
Closed-door talks continue regarding a proposal to blend American Airlines with rival US Airways.
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