The US Pension Benefit Guaranty Corporation (PBGC) believes American Airlines parent company AMR needs to show a strong case to the court overseeing its Chapter 11 reorganisation that ducking its pension commitments is necessary.
"Counsel for American claims that it needs to kill employees' pensions in order to be competitive with other major carriers," said PBGC. "The numbers tell a different story."
PBGC cited Delta Air Lines, which entered Chapter 11 in 2005, of paying an average of $13,210 in pension costs, roughly two-thirds more than American's pre-bankruptcy costs of $8,201.
The agency also argued that some of the $4 billion AMR has in cash should have already been paid into its pension plans.
"However, Congress, hoping to preserve plans, allowed American to defer the payments. It would be a tragedy if American repaid Congress's generosity by turning around and killing the plans anyway," said PBGC.
Previously PBGC has estimated that American's four traditional pension plans collectively had approximately $8.3 billion in assets to cover $18.5 billion in benefits.
The agency concluded if American ends its pension plans, it would be responsible for paying $17 billion in benefits, and at least a billion dollars in benefits would be lost.
PBGC also stresses it has a record $26 billion deficit as a result of failed pension plans it has already assumed.
The union representing American's 16,000 flight attendants today publicly stated the carrier should honour its pension obligations.
Members of the Association of Professional Flight Attendants (APFA) stated a move by American to terminate its pensions would add $10.2 billion to the pool of unsecured claims in American's Chapter 11 reorganisation, "which would significantly dilute the recovery of other unsecured creditors".
Representatives from three of American's unions, including APFA, have been named to the company's list of unsecured creditors.
Wilmington Trust holds the largest unsecured claim of $460 million.