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Old 06-07-2005, 05:45 PM   #1  
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Default Joint AMR/APA/APFA press release

June 7, 2005

Honorable Charles Grassley
Honorable Max Baucus
United States Senate
Committee on Finance
Washington, DC

Dear Chairman Grassley and Senator Baucus:

Today the Finance Committee is holding a hearing on the crisis of pensions in the airline industry. Although American Airlines and its employees were not asked to appear as witnesses, we are keenly interested in the issue and are preparing a written statement that we respectfully ask to be entered into the record.

While the media has focused almost exclusively on the crisis precipitated by airlines abandoning or freezing pension plans, American and its employees are following a different path. We are, together, working hard to maintain our defined benefit pension plans. We urge the Committee to enact legislation that would give us the chance to do so.

To be clear, we understand the desire other companies have for legislation that allows companies, through the collective bargaining process, to freeze defined benefit plans and convert to other types of plans. This is a useful tool to have if necessary to prevent more drastic results. But we need legislation that does not require us to freeze our pension plans.

We hope not to resort to a freeze or to the termination of our pension plans. We need the help of Congress to enact legislation that provides a realistic and stable interest rate for calculating full funding and a reasonable period of time to amortize the amount necessary to achieve full funding -- all without limiting lump sums and other benefits of our plan participants. American's defined benefit plans are the best funded in the airline industry. Our plans have been managed prudently over the years, earning an average return of well over 10 percent. Moreover, we have a history of steadily contributing to our plans even in the years when cash was very short. In the last two years we have contributed over $599 million dollars to our plans.

We fear that in the midst of concern about the potential default of airline plans, Congress will take actions that would inadvertently cause our plans to become just as vulnerable as those currently in trouble. In particular, any legislation that would place greater funding burdens on companies with "below investment grade" credit ratings could have the perverse effect of forcing us to abandon our plans. We do not oppose setting different premium rates for companies with more risk reflected in their pension plans, but the measurement should be the strength of the plan, not the strength of the sponsor. We strongly oppose different funding rules based on a company's credit ratings.

With the help of Congress, we at American have a very realistic chance of returning to our historic status of fully funded defined benefit plans. We will submit a full statement for the record presenting in more detail our legislative and regulatory objectives.

Sincerely yours,

Captain Ralph Hunter Tommie L. Hutto-Blake
President President
Allied Pilots Association Association of Professional Flight
Attendants


James C. Little Gerard J. Arpey
Int'l. Executive Vice President Chairman & CEO
Director Air Transport Division American Airlines, Inc.
Transport Workers Union© 2005 PRNewswire
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