A U.S. Bankruptcy judge has approved a request by American Airlines to eliminate a lump-sum pension option for pilots who retire. The airline, which is in Chapter 11bankruptcy, argued that if the pilots were able to take their pensions in a single lump sum, too many would choose to retire, creating operational problems for the company. The unsecured creditors committee agreed with the airline, indicating they would have opposed the airline’s reorganization plan if it retained the lump-sum option.
Pilots still will be able to receive their pension benefits in monthly payments over their lifetimes under the labor terms approved by the judge. But even those pilots who retired before American’s bankruptcy will lose their ability to take their pensions in a lump sum. The judge rejected their argument that no operational risk would be created if they kept the option because their departures already had occurred.
The judge also approved new collective bargaining terms that affect how ex-TWA pilots will be merged into the pilot union’s seniority list after the airline closes the former TWA pilot base in St. Louis. The new contract terms are a critical milestone in American’s quest to emerge from bankruptcy.
When a business files for Chapter 11 bankruptcy, it must develop a plan for debt reorganization. The plan’s elements may include things like a repayment schedule, issuing stock to creditors, a sale of assets or renegotiating union contracts. Creditors form committees that negotiate with the company to get the best deal for themselves, and the bankruptcy judge must approve the final plan. An experienced bankruptcy attorney can help a business owner develop the right reorganization plan and negotiate with creditors.
Source: The Dallas Morning News, “Bankruptcy judge dumps American Airlines pilots’ lump-sum option on pensions, approves new contract with Allied Pilots Association,” Terry Maxon, Dec. 19, 2012by