Bankruptcy court near ruling on American retiree health plans

03/18/2014 6:42 PM

03/19/2014 8:40 AM

American Airlines retirees may soon know what will happen to their medical benefits plans.

U.S. Bankruptcy Judge Sean Lane told lawyers during a court hearing Tuesday that he has prepared a written ruling on the issue if American cannot reach a settlement with a committee of retirees. Lane gave the attorneys two weeks to come to a settlement, according to sources familiar with the proceedings.

During the proceedings, American’s lawyers told Lane that the retiree medical plan costs the company $10 million a month.

In July 2012, American asked the bankruptcy court to allow it to modify its retiree health insurance plan to reduce its costs while restructuring. Lane held a hearing in January 2013 to discuss the proposed modifications in which the plan would continue but retirees would be responsible for 100 percent of the premiums. But he never issued a ruling.

“We approached our restructuring with the commitment that all of American’s people — current and retired — have a stake in the company’s ability to survive and succeed. We are following the path of many other U.S. airlines which have previously reduced their costs through the bankruptcy process, so that we can successfully restructure our company to effectively compete,” the company said in a statement Tuesday afternoon.

In previous court filings, American’s parent company said its liability for retiree benefits in 2010 was $1.2 billion for American workers and an additional $111 million for former TWA employees.

American has more than 46,000 retirees, but only 30,000 receive medical and life insurance through the company. Any changes made to the plan would affect those who retired before November 2012. Workers who retired after that date already pay the full cost of retiree medical plans if they are under 65, as American modified its retiree benefits for future retirees in February 2012.

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