Did pension plan turbulence cause the crash of AMR Corp, the parent company of American Airlines?
This is the question posed by many in the industry, including Jon Waite, Director of Investment Management Advice of SEI Institutional Group, who notes that the bankruptcy exposes the challenge of providing a legacy benefit in an industry where the competition is not doing the same.
General Motors —perhaps the symbol of the deteriorating affect of pension debts on corporate profits—was not created as a pension plan, yet its pension grew to dwarf its core business, and like many plan sponsors, the scheme has become a legacy problem. Similarly, early signs are indicating that the four underfunded pension plans of AMR Corp. were a significant factor in the company’s decision to file for bankruptcy.
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