Does "American Airlines" Need To Terminate Its Pensions in Bankruptcy?

American Airlines' parent company AMR corp, which is currently in bankruptcy, wants to eliminate its four pension plans, which it says is a "multibillion dollar liability on its balance sheet".

The Pension Benefit Guaranty Corp. disagrees, and says that American can emerge from bankruptcy without terminating its pensions.

They say that American still has $3 billion in cash and Delta, which has higher pension costs, is currently profitable. Also, Continental did not have to terminate any of its pensions during its bankruptcy.

The Pension Benefit Guaranty is the federal agency that takes over pensions when the original companies can no longer run them. Instead of tax money, they are funded by premiums paid by companies with pension plans.

However, the premiums that Congress allows them to charge aren't enough, and they are currently running a $26 billion deficit which, according to a "Chicago Tribune" article, would become $35 billion if they took over AMR's pensions.

Because of this deficit, they would only be able to pay each American Airline pensioner up to $54,000/year. This would short change some retirees, such as pilots.