American Airlines Negotiations

Unlike many companies, American has remained committed to preserving its employees’ defined benefit pension plans. Since the beginning of 2002, the company has contributed more than $2.1 billion to these plans, underscoring its commitment to employees and standing in stark contrast to U.S. network airline competitors that have terminated or frozen their employee pension plans in bankruptcy court. Even as the company faced record fuel prices and was challenged by steep losses throughout 2008, American met its minimum funding requirement of $78 million for the year. Under federal guidelines, the company was not required to make contributions in 2009. However, the company will contribute over $450 million in 2010.

The company understands the critical importance of protecting and funding employees’ pensions as part of their total compensation package and funds defined benefit plans for four employee groups:

• Pilots
• TWU-represented employees
• Flight Attendants
• Management/Support staff

American's consistent and conservative approach to investing, as well as its relentless focus on its pension commitment, has allowed it to maintain defined benefit pension plans for 128,524 participants when other companies have frozen or eliminated this benefit.

Employees fought hard in 2003 to make sure the company could continue to fund its employee pension plans. The company is committed to providing employees with tools to help prepare for their retirement, but we need to look at ways to modernize our retirement plans to more closely align with what the industry and other large companies are providing. When pension plans were first designed decades ago, employees retired at 65 – but the average life expectancy was much shorter than it is today, so the defined benefit pension plan likely paid out for about 10 years. Today, people are living longer and thus drawing on the benefits for longer. Longevity is obviously good news, but this also means that the plans have become increasingly expensive and difficult to fund, especially as our employee population ages.

Key Defined Benefit Pension Plan Facts

• Since 2002, American has contributed over $2.1 billion to its pension plans.
• In recent years, American has consistently funded all employees’ defined benefit plans at or above the federally-required minimum – even during periods in which the company did not earn a profit.
• AA continues to manage investments conservatively and with an eye toward being able to sustain these important benefits for employees and retirees for the long term.
• American earned PLANSPONSOR's Corporate Plan Sponsor of the Year in March 2007.

American vs. Other Airlines

• The company's goal continues to be to avoid the adverse pension outcomes suffered by other network carriers by securing its financial future.
• Competitors such as United, Delta, Northwest and US Airways have terminated or frozen their defined benefit plans.
• Low cost carriers, such as jetBlue and AirTran, do not offer defined benefit plans to their employees.