American Airlines

April 18, 2014

American must pay benefits of union-represented retirees, judge says

American Airlines wanted to make all retirees pay the full premiums for their health and life insurance benefits. The bankruptcy judge says the carrier may do that only for non-union workers.

American Airlines cannot change its union retirees’ benefits but can alter them for non-union workers, according to a ruling made by a bankruptcy judge Friday.

U.S. bankruptcy judge Sean Lane denied American’s 2012 request for a summary judgment to alter all of its retiree medical and life insurance plans. The Fort Worth-based carrier wanted to shift all of the premium costs of its retiree medical and life insurance plans to the retirees.

Lane denied American’s request for summary judgment for TWA retirees because it was unclear what was American’s responsibility to retirees when it purchased TWA.

“The relevant documents contain language reasonably susceptible to interpretation as a promise to vest benefits and lack language categorically reserving the Plaintiff’s [American’s] right to terminate their contributions to the retiree benefits,” Lane wrote in his 49-page ruling.

However, the company is allowed to change benefits for the majority of current retirees who were non-union or management workers while at American, he said.

In a prepared statement, the company said it will review Lane’s ruling “and consider next steps related to the retiree health and life insurance benefits.” American thanked Lane for his analysis and said “we always remain open to productive discussions to finally resolve this matter.”

Typically when a request for summary judgment is denied, the issue moves forward with hearings and a possible trial to decide the issue. However, in his filing, Lane presented legal arguments that suggested that unions’ collective bargaining agreements would take precedent over any retiree benefits plans.

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 until Friday.

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

American has more than 46,000 retirees, of which 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.

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