AMR Corp., parent of American Airlines, reversed course on Wednesday, saying it is willing to freeze pensions at current levels, rather than terminate them as the company reorganizes under Chapter 11 bankruptcy protection.

The new plan means more workers, namely higher-paid employees with bigger pensions, would be paid their full pension amounts.

However, pilots are not included in the airline's change of decision. That's because the airline fears too many pilots would opt to take lump-sum pension payouts and retire at the same time, leaving the airline with too few pilots to operate, a spokesman said.

In February, American said it would terminate pension plans for 130,000 current and retired employees and turn over the pension plans to the Pension Benefit Guaranty Corp., an insurance-like agency of the federal government that is already running a deficit from assuming terminated pensions of other companies that have gone through bankruptcies.

With frozen pensions, workers will not accrue additional benefits, but AMR will retain the pensions and all employees -- except pilots -- would get their full pension amounts. Under a PBGC-administered pension, payouts would have been capped. The cap is currently about US$56,000 per year. For the future, AMR pension plans are being replaced by 401(k) retirement plans.

Among the biggest groups affected are members of the Transport Workers Union, which represents about 1,400 workers at Chicago O'Hare International Airport.

James C. Little, TWU International President, called the move a "very important step forward."

"We would have preferred to keep the existing defined benefit plan in place, but that simply was not possible," he said.

"It's definitely a win for us and for other workers as well."

The concession by AMR comes as the airline tries to negotiate with unions on US$1.25 billion in cost savings it says it needs. Both sides have said they prefer to have consensual agreement on those cuts, but AMR has said it needs that process to be quick - although it has not put deadlines on those talks. If talks fail, cuts could be imposed by a bankruptcy judge. The airline and the unions would then lose control over where those cost cuts come.

AMR said the offer to freeze pensions could help negotiations. "We believe this solution would remove a major obstacle to reaching consensual agreements and help to spark needed urgency at the bargaining table," AMR wrote in a letter to employees on Wednesday.

The airline has not changed plans to eliminate some 13,000 jobs.

Pilots, who are typically high-paid and would suffer deep pension cuts under a PBGC takeover, still stand to lose significant benefits. AMR said it needs assurances that too many pilots would not take advantage of a lump-sum pension option and retire at once. "We wouldn't have pilots to fly the airplanes," said AMR spokesman Bruce Hicks, adding that if pilots and the airlines can come up with a solution, the company would agree to only freeze pilot pensions too and not terminate them.

"Unless we are able to address the lump-sum issue, a freeze scenario cannot even be considered," AMR told employees.

AMR, parent of American Airline and American Eagle regional jet service, filed for bankruptcy on Nov. 29.