DALLAS (AP) — A proposed federal regulation would help American Airlines freeze the pension plan for its pilots instead of terminating the plan.
The proposal would remove one source of conflict between American and the pilots' union. However, the union's board still rejected American's latest contract proposal, citing uncertainty about other provisions.
A federal bankruptcy judge is expected to rule Friday on whether American can break contracts with union pilots, flight attendants and mechanics and impose its own terms on the workers.
The Treasury Department on Wednesday proposed a rule that could allow companies in bankruptcy proceedings to eliminate the ability of an employee — such as an American Airlines pilot — to get part of his benefits in a lump-sum payment. Instead, pilots would get their benefits spread out over monthly installments.
The pilots' ability to get a lump sum was suspended when American and parent AMR Corp. filed for bankruptcy protection in November. American feared that if the lump-sum option were restored when it emerges from bankruptcy, so many pilots would retire that the airline couldn't fly all its flights.
Gregg Overman, a spokesman for the Allied Pilots Association, said giving up the lump-sum option was a fair trade-off for pensions being frozen and not terminated. Under a termination, some pilots would see their benefits reduced.
"The lump sum was a popular provision, so this is clearly a compromise," Overman said. "For the pilot group as a whole, it's the best option."
The U.S. Pension Benefit Guaranty Corp., which would take over the pension plans if American terminates them, also praised the Treasury proposal. The rule could become final after a 60-day period for public comment.