AMR Corp , the bankrupt parent of American Airlines, proposed a plan to freeze the pensions covering many of its workers rather than terminating them and leaving them to government insurers, which in many cases would result in lower payouts.

The third-largest U.S. airline said in letters to employees on Wednesday that the proposal does not extend to its pilots.

AMR said it still must achieve the $1.25 billion in labor cost savings it needs to restructure. The company said it would seek new capital to cover the incremental annual costs of funding frozen pensions.

American, which filed for bankruptcy on November 29, said in February that it would seek bankruptcy court approval to terminate traditional pension plans covering 130,000 workers and retirees. Those plans would be replaced with 401(k) plans with a company match.

(Reporting by Kyle Peterson in Chicago; Editing by Lisa Von Ahn)

American Airlines