APA Negotiations

PENSIONS

The company recognizes the importance of pilots' retirement benefits. American currently provides the best-funded, most rewarding pilot retirement plan in the industry. This is done through a combination of the Fixed Income Plan (the A Plan) and the Variable Income Plan (the B Plan) which provide an option to pay out benefits in lump sum upon retirement. On average, an American career pilot retires with lump sum pension benefits worth between $1 million to $3 million.

Industry Pilot Retirement Benefit Comparison*

Defined Benefit
Defined Contribution
401(k)
Carrier
Plan
Status
Plan
Company Contribution
Company Match
American Yes Active Yes 11% 0%
Continental Frozen 5/31/2005 Yes 12.75% 0% + Variable
Delta Terminated - PBGC 9/2/2006 Yes 11% 0%

Northwest

 Frozen 1/31/2006 No 6% guaranteed
United Terminated - PBGC 5/1/2005 Yes 16% 0%
US Airways Terminated - PBGC 3/31/2003 Yes - East Only 10% East 0%; West 10% guaranteed
Alaska Yes Active No
Southwest No No
AirTran No Yes 10.5%
JetBlue No No

Contract negotiations must take into account federal legislation that has raised the mandatory pilot retirement age from 60 to 65. This has the potential to increase pilot operating costs. Therefore, the company believes that the best way to protect pension benefits is to achieve competitive costs that build a framework for long-term growth and profitability.

Pilot B Plan

The company's proposal to modernize the Pilot B Plan seeks to give pilots more control over their retirement investments and protect pilots' B Plan pension funds.

  • Pilots' pensions would be better protected. A pilot's B Plan funds would not be affected by other pilots' retirements, particularly crucial when a soft economy triggers mass retirements as it did in 2008.
  • Pilots would have more control over their investments. They could choose to self-manage their retirement assets or have them professionally managed.
  • Pilots could monitor and determine their assets' value on a daily basis, in real time, something not possible under today's system.
  • Pilots would have more control over the timing and amount of post-retirement distributions.
  • Administrative costs associated with the plan would be reduced and save both pilots and the company money.

The high number of pilot retirements in 2008 has negatively affected all B Plan participants by over $101 million. On average, each remaining pilot in the B Plan lost approximately $9,049 in the value of his or her B Plan units. Pilots can estimate just how much money was lost from their B Plan funds in 2008 using our Pilot B Plan Proposal and Calculator.

* Source: Aircon

   Data as of March 2008

   DL defined contribtion includes 9% to DC plan and 2% to Savings Thrift plan. DC contribution will increase to 10% in 2010.

   DL/NW joint agreement will increase DC plan contributions to 11% in 2011 and 12% in 2012.