Delta seeks pension relief
CEO, union, retirees lobby Congress
By RUSSELL GRANTHAM
The Atlanta Journal-Constitution
Published on: 03/18/05
Delta Air Lines, its employees and other carriers with traditional retirement plans are asking Congress for more relief from pension fund contributions they say will swamp sinking cash reserves.
In a letter to several members of Congress, Delta and its allies seek more flexibility to avoid a big jump in cash payments.
Last year Congress altered the payment formula to help airlines, but that measure expires at year-end.
Delta faces a $5.3 billion shortfall in pension trust funds that it is required to keep to cover retirees' payments. This year the airline expects to spend $450 million in much-needed cash on the shortfall and other pension plan expenses.
Delta wants Congress to allow airlines to spread catch-up contributions over 25 years, significantly lowering the annual cash drain.
Without relief, the payments "threaten our ongoing efforts to restructure Delta as a viable airline," said Delta Chief Executive Gerald Grinstein, Air Line Pilots Association President Duane Woerth, and several Delta employees and retirees said in the letter to members of Congress.
The Bush administration has a pension reform proposal that would give carriers two extra years to make payments but increase Delta's cash drain by changing how make-up payments are calculated, the airline contends.
Delta and allies including Northwest and American say pension relief is needed to avoid more airline bankruptcies that could result in terminating pension plans and dumping liabilities onto the deficit-ridden Pension Benefit Guaranty Corp. The quasi-government firm insures pension payments to retirees up to certain limits.
Delta's employees and pilots union are part of the lobbying effort, and about 30 employees lobbied on Capitol Hill Thursday.
They could face an uphill battle. The PBGC, where Labor Secretary Elaine Chao heads the board of directors, favors the Bush administration's proposal.
Earlier this month, PBGC Executive Director Bradley Belt testified that Congress needs to scrap overly complex pension funding rules that "allow companies with underfunded plans to defer contributions for many years into the future."
Kevin Smith, a spokesman for the House Education and Workforce Committee, indicated another relief proposal for airlines probably won't get a warm welcome.
"We're looking at reform and not relief," said Smith. The committee is chaired by Rep. John Boehner (R-Ohio), a recipient of Delta's letter.
Delta's pension funds are among the least-healthy in the industry, despite recent moves to freeze its traditional pensions and shift employees to less costly retirement plans.
Delta, which warned last week that it will run short of cash this year unless conditions improve or it sells assets, expects this year's pension contribution of $450 million to rise in coming years.
Airline analyst Roger E. King, in a recent report for CreditSights, estimated the annual cash drain from payments into Delta's pension plans will rise to $900 million by 2007.
Airlines with traditional plans face a growing cost disadvantage to other carriers that have shed their plans in bankruptcy and low-cost carriers that don't have traditional pension plans. United and US Airways, both reorganizing in bankruptcy court, have terminated some plans and turned them over to the PBGC. Meanwhile, some discount carriers that don't have such pensions oppose giving rivals additional relief.
CEO, union, retirees lobby Congress
By RUSSELL GRANTHAM
The Atlanta Journal-Constitution
Published on: 03/18/05
Delta Air Lines, its employees and other carriers with traditional retirement plans are asking Congress for more relief from pension fund contributions they say will swamp sinking cash reserves.
In a letter to several members of Congress, Delta and its allies seek more flexibility to avoid a big jump in cash payments.
Last year Congress altered the payment formula to help airlines, but that measure expires at year-end.
Delta faces a $5.3 billion shortfall in pension trust funds that it is required to keep to cover retirees' payments. This year the airline expects to spend $450 million in much-needed cash on the shortfall and other pension plan expenses.
Delta wants Congress to allow airlines to spread catch-up contributions over 25 years, significantly lowering the annual cash drain.
Without relief, the payments "threaten our ongoing efforts to restructure Delta as a viable airline," said Delta Chief Executive Gerald Grinstein, Air Line Pilots Association President Duane Woerth, and several Delta employees and retirees said in the letter to members of Congress.
The Bush administration has a pension reform proposal that would give carriers two extra years to make payments but increase Delta's cash drain by changing how make-up payments are calculated, the airline contends.
Delta and allies including Northwest and American say pension relief is needed to avoid more airline bankruptcies that could result in terminating pension plans and dumping liabilities onto the deficit-ridden Pension Benefit Guaranty Corp. The quasi-government firm insures pension payments to retirees up to certain limits.
Delta's employees and pilots union are part of the lobbying effort, and about 30 employees lobbied on Capitol Hill Thursday.
They could face an uphill battle. The PBGC, where Labor Secretary Elaine Chao heads the board of directors, favors the Bush administration's proposal.
Earlier this month, PBGC Executive Director Bradley Belt testified that Congress needs to scrap overly complex pension funding rules that "allow companies with underfunded plans to defer contributions for many years into the future."
Kevin Smith, a spokesman for the House Education and Workforce Committee, indicated another relief proposal for airlines probably won't get a warm welcome.
"We're looking at reform and not relief," said Smith. The committee is chaired by Rep. John Boehner (R-Ohio), a recipient of Delta's letter.
Delta's pension funds are among the least-healthy in the industry, despite recent moves to freeze its traditional pensions and shift employees to less costly retirement plans.
Delta, which warned last week that it will run short of cash this year unless conditions improve or it sells assets, expects this year's pension contribution of $450 million to rise in coming years.
Airline analyst Roger E. King, in a recent report for CreditSights, estimated the annual cash drain from payments into Delta's pension plans will rise to $900 million by 2007.
Airlines with traditional plans face a growing cost disadvantage to other carriers that have shed their plans in bankruptcy and low-cost carriers that don't have traditional pension plans. United and US Airways, both reorganizing in bankruptcy court, have terminated some plans and turned them over to the PBGC. Meanwhile, some discount carriers that don't have such pensions oppose giving rivals additional relief.
