American Airlines Sues Retired Workers Over Health And Life Insurance Benefits

American Airlines Sues Retired Workers Over Health And Life Insurance Benefits

By Daniel Baxter

July 9, 2012 - On Friday American Airlines and its parent company, AMR filed a lawsuit against the Committee of Retired Employees, (AMR Corporation and American Airlines, Inc. v. Committee of Retired Employees, Case No.11-15463) a group that looks out for retirees’ interests in the bankruptcy case, the lawsuit looks to end health care and life insurance benefits to over 35,000 retirees.

AMR, American and AMR’s regional airline American Eagle filed for bankruptcy protection on November 29, 2011, with over $4.1 billion in the bank. At that time the company reported it was not in need of emergency money like in most bankruptcies.

The company was able to pay its bills in full and on time and the company would continue to purchase 460 planes over the next decade at a cost of $13 billion. In fact the company shares were rated at that time as “buy.” So why file for bankruptcy?

AMR and American Airlines plans to cut over a billion dollars (17 percent) in current employee benefits per year, reduce its labor force and eliminate portions of the employee retirement benefits. AMR and American Airlines seeks an affirmation from the bankruptcy court that, although they have historically provided their retirees with health and welfare benefits, that under the law they are not required to continue to do so. AMR and American Airlines contend they never promised its retirees health and welfare benefits for life.

AMR and American Airlines attorneys stated in their suit that “Under the law of this Circuit, a plan sponsor is required to continue providing retiree health and welfare benefits to a plan participant only where the plan sponsor has promised to provide benefits to the participant for life and has not reserved its right to modify the benefit plan. Here, AMR and American Airlines have not made any such promises, explicitly have reserved their rights to modify the benefit plans, or both. Therefore, American's retirees hold no vested right to the retiree health and welfare benefits American currently provides.”

AMR and American Airlines seeks to have the bankruptcy judge rule in favor “because the retiree health and welfare benefits are not vested, and because modifying retiree health and welfare benefits to reduce costs falls within American's sound business judgment, American may unilaterally modify health and welfare benefits for current retirees,” this measure is to allow AMR and American Airlines to become more profitable.

Bruce Hicks, a AMR spokesman said “the restructuring process is difficult for everyone affected, and we understand any changes to these benefits are concerning to our retirees.” Hick further stated that the new plan they propose for their current retires will be similar to their current employees plan, that is they will have to pay for it. AMR and American Airlines reported in court documents that they currently provide retiree health and welfare benefits to five groups of retired employees:

(1) Retired non-union employees (the "Non-Union Retirees");
(2) Retired pilots (the "Pilot Retirees");
(3) Retired ground employees who had been employed in a variety of different positions (the "TWU Retirees");
(4) Retired flight attendants (the "Flight Attendant Retirees"); and
(5) retired employees of Trans World Airlines (the "TWA Retirees").

AMR and American Airlines’ reported that they paid out for retiree health and welfare benefits for current Non-Union Retirees, Pilot Retirees, TWU Retirees, and Flight Attendant Retirees, $1.2 billion and $111 million to TWA Retirees in year 2010, year 2011 was mentioned, more than likely much lower.