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March 18, 2014

American retirees may soon know the fate of their medical benefits

American Airlines retirees may soon know what will happen to their medical benefits plans.

Bankruptcy judge Sean Lane apparently told lawyers during a court hearing on Tuesday that he has prepared a written ruling on the issue if American can not reach a settlement with a committee of retirees. Lane gave the attorneys two weeks to come to a settlement, those familiar with the proceedings said on Tuesday.

In July 2012, American asked the bankruptcy court to allow it to modify its retiree health insurance plan to reduce its costs while restructuring. Lane held a hearing in January 2013 to discuss the proposed modifications in which the plan would continue but retirees would be responsible for 100 percent of the premiums but he never issued a ruling.

"We approached our restructuring with the commitment that all of American’s people – current and retired – have a stake in the company’s ability to survive and succeed. We are following the path of many other U.S. airlines which have previously reduced their costs through the bankruptcy process, so that we can successfully restructure our company to effectively compete," the company said in a statement on Tuesday afternoon.

In previous court filings, American's parent company said its liability for retiree benefits in 2010 was $1.2 billion for American workers and an additional $111 million for former TWA employees.

American has over 45,000 retirees but not all of them use the retiree medical plan. Any changes made to the plan would affect those who retired before November 2012. Workers who retired after that date already pay the full cost of retiree medical plans if they are under age 65 as American modified its retiree benefits for future retirees in February 2012.

-Andrea Ahles

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