American pilots retire early to avoid stock market crash

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The Independent Online
IN ONE of the quirkier consequences of the stock market plunge, American Airlines, the number two carrier in the United States, has revealed that unusually large numbers of its pilots are taking early retirement to cash in pension benefits linked to stocks still set at July prices.

The sudden exodus is depleting the ranks of its pilots to such a degree that American has been forced to curtail its schedule and reduce capacity by 1 to 2 per cent during November and December.

The lost flights are all expected to be on long-haul routes to Latin America, where traffic has fallen.

Under US aviation regulations, all commercial pilots must retire in any event when they turn 60. In any normal month, American, with about 9,000 pilots on the payroll, expects to lose about 20 cockpit captains to retirement. That loss can usually by covered by new recruits joining the airline.

The rate of loss suddenly accelerated in September, however, when 63 American captains, most of them flying long-haul routes on wide-body jets, hung up their hats.

A similar number are expected to ground themselves this month and again in November.

Behind the rash of departures is the pension plan operated by the airline. Benefits for retiring captains are derived from a pooled mutual fund, the value of which has slipped 10 per cent since the start of the market swoon. Shares in American Airlines itself have suffered an even greater 40 per cent slide.

Under contract rules, American pilots have a three-month window during which to make their withdrawals. Thus, benefits taken now are set at prices as they were in July, when the market was still high. For the longest- serving pilots, the pension package owed to them can be worth $3m (pounds 1.84m).

"The money managers are telling us that if you have to retire prior to the end of the first quarter of next year, you've got to go now," Captain Cecil Ewell, American's chief pilot and vice-president, told the Wall Street Journal yesterday. "We've had a lot of guys go out early just because of the market."

To keep the schedule as intact as possible, American is ordering pilots who now work in management, with only occasional shifts in the cockpit, to get back into the air more or less full-time. Officials said that pilots should be back up to full numbers by next spring.