American Airlines wants to cut retirement benefits in bankruptcy

On Behalf of | Jul 20, 2012 | Business & Commercial Bankruptcy |

When a company files for bankruptcy in New Jersey or elsewhere in the country, there can be changes for the employees, both past and current, of that organization. In one recent commercial bankruptcy from AMR Corp. and American Airlines, the changes may come as a shock, should they be approved by the bankruptcy court. AMR Corp., the parent company of American Airlines, has filed a lawsuit as part of the bankruptcy proceedings, asking that the court allow them to stop paying for life insurance and medical care for its retirees.

The company argued that the proposed cut in benefits to retirees was an effective way to slash costs. The company is trying to cut spending on its workforce by $1 billion per year. Until now, the savings have come through layoffs, a push for greater productivity from each employee, and benefits cuts. Now a reduction of benefits may be on the table for retirees.

The move, if approved, would affect the life insurance and medical benefits of some 40,000 American and TWA Airlines retirees. According to the company lawsuit filed in the commercial bankruptcy, the liability for benefits to retirees was more than $1.3 billion in 2010. This is a large number for a company that has reportedly lost $10 billion since 2001.

Commercial bankruptcy can affect the lives of the employees of a company filing for protection in many ways, as some in New Jersey have learned during the recent recession. For many organizations, layoffs and closures are an unfortunate but sometimes necessary way of life, as efforts to streamline costs impact the lives of many individuals and families. The bankruptcy court has yet to rule on the company’s request.

Source: The Washington Post, “In bankruptcy case, American Airlines sues retirees to stop paying insurance benefits,” July 6, 2012


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