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American Airlines spends $800 million more a year on labor than its main rivals, a major reason that it filed for bankruptcy protection last week. Not coincidentally, it planned to spend $747 million next year on pensions and retiree medical benefits, two expenses that most competitors abandoned long ago.

In bankruptcy court, where every expenditure is contested, this is the definition of a rich target. It's almost begging to be slashed.

If American ultimately abandons the pensions because they're unaffordable, it would be the biggest pension bust in U.S. history. The current unfunded liability is estimated at $10.2 billion, significantly more than previous pension claims against bankrupt United Airlines and Bethlehem Steel.

But it won't be easy for American to eliminate the pensions, and it would face major penalties for dumping the entire package -- almost half a billion dollars in all.

If that serves as a deterrent, that's good news for nearly 129,000 American employees and retirees. The vast majority will receive all the benefits they've earned, either from American or a quasi-federal agency that insures the plans. But everyone would get every dollar if American keeps the plans as they are.

American's pensions are likely to be frozen soon, so their values won't grow much. Still, most employees will get a monthly payment that begins at retirement and continues the rest of their lives. And the company is also likely to offer an improved 401(k) eventually.

But if American terminates the plans and turns them over to the Pension Benefit Guaranty Corp., some high-paid workers will take a hit. American's pilots, especially those older than 50, are most vulnerable.

Every airline and every pension plan within a company is different. One American pension may be terminated, while the company continues to pay for others. There's no uniform approach to this, and changes in federal pension laws in 2006 altered the landscape.

When United Airlines and US Airways went bankrupt, they terminated all their pensions and turned them over to the pension agency. In 2006, bankrupt Delta Air Lines dumped only its pilots' pension and kept the plan that covered the rest of its employees. Northwest Airlines emerged from bankruptcy in 2007 with all its pensions in house, largely because Congress let the company stretch out the payoff for 17 years.

It's too early to tell what will happen with American, and the company isn't hinting at its strategy. Certainly, the pension agency will fight every step of the way, hoping to persuade American to pay all the benefits earned by American employees.

But if the agency must come to the rescue, it will extract a price as a large unsecured creditor. With Delta, the agency was granted 43 million shares of stock, equal to about 20 percent of the emergent company.

That's expensive, but pensions are a huge nut. Last week, the agency estimated that American's pension liabilities were $10.2 billion greater than the assets. At the end of 2010, American put the gap at $5.9 billion, plus $2.9 billion for retiree healthcare.

The bankruptcy process usually eliminates such expenses, often leaving the unfunded pensions with the agency. In many ways, the agency resembles the Federal Deposit Insurance Corp., which insures bank deposits. Employers fund the pension agency with fees, and the insurance protection has a hard cap.

The agency's maximum payout this year is $54,000 annually (or $4,500 per month) for a worker who retires at age 65. Include a 50 percent survivor annuity, and the maximum falls by 10 percent.

Most pensions at American won't pay more than that, except for pilots who have considerable experience. But the agency's cap declines significantly for those who retire early. The annual cap for a 55-year-old retiree is $24,300, and that could affect a much wider swath of the workforce.

One option for American would be to lobby Washington for more time to pay off its pensions, as Northwest and Delta received in 2006. Those rule changes also included a new penalty: Bankrupt companies that terminate pensions must later pay $1,250 per participant per year -- for three years.

For American, that would be almost $161 million annually for all four pensions. If American terminated only the pilots' pension, as Delta elected to do, the 11,324 participants would translate into a penalty of about $14 million.

The pension agency evaluates each company pension separately, and it hasn't indicated whether one of American's accounts for a disproportionate share of the unfunded liability.

With Delta, retired pilots took deep cuts. Unlike at American, they weren't allowed to take their full retirement in a lump sum, so the agency's caps had a dramatic effect. Wendell Lewis, who retired at 56 after 27 years, said his monthly benefit dropped from $6,500 to $1,700 to zero -- in part, because he had taken a partial lump sum earlier. Rhea Nichols, a 33-year veteran who retired in 2003, said his payout fell by two-thirds.

They're among 3,500 Delta retirees who are appealing to the agency, arguing that they deserve more.

They also took some hits on healthcare, and in a big bankruptcy, it's not unusual for current employees and retirees to square off.

At American, as with Delta, United and other legacy carriers, deep reductions have to come from somewhere. Lewis and Nichols said their union protected active pilots in Chapter 11, but not retired ones.

"Most employees will be OK," Nichols said about bankruptcy. "But my advice to retirees is to get a fantastic [benefits] lawyer, because they're going to need it."

Read more: American Airlines pensions a rich target in bankruptcy proceedings | Mitchell Schnurman ...

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