NOT GOOD FOR DELTA

ohcaptainron

Member
Sep 12, 2002
98
1
Delta Air Lines Inc. filed a formal request with bankruptcy court late Friday to terminate its pilots' pension plan, as President Bush prepared to sign a bill aimed in part at helping the struggling carrier save its other employees' pensions.

If the court in New York approves Delta's request to cancel its pilots' pensions effective Sept. 2, the government's pension insurer would take over the plan and pay pilots a reduced benefit based on when they retire and other factors. A hearing on the request is set for Sept. 1.

The 6,000 pilots, as part of a $280 million concessions agreement with the company first reached in April, have agreed not to oppose the pension termination request, though other groups may oppose it. Atlanta-based Delta notified the Pension Benefit Guaranty Corp. in June of its intent to seek termination of the plan.

"Unless the pilot plan is terminated, Delta will very soon face an operational and financial crisis that will prevent it from emerging from Chapter 11," the airline said in its filing.

The bankruptcy court request comes just a day after the Senate approved a pension bill that provides special relief for Delta and Eagan, Minn.-based Northwest Airlines Corp., allowing them to have 17 years to fully fund their pension plans.

Delta, the nation's third-largest carrier, had lobbied hard for the bill, arguing it was essential to help them avoid terminating the pension covering its ground workers and flight attendants. Bush said Friday he planned to sign the bill into law soon.

Delta's effort to terminate its pilots pension plan, which is significantly underfunded, had been expected, as the company seeks to emerge from Chapter 11 by the middle of 2007 a leaner airline. UAL Corp.'s United Airlines, the nation's No. 2 carrier, terminated its pilots' pension when it was in bankruptcy protection.

Delta has promised its pilots a $650 million note in the event the pension is terminated. Delta also has promised the pilots a $2.1 billion unsecured claim. The PBGC has argued that money belongs to the agency, a claim the company has rejected.

Once the plan is terminated, the company's pilots won't be entitled to the hefty lump sum payments under the existing pension plan, which allows pilots to retire at 50 and receive half their benefits in a one-time payout and the rest in an annuity later.

The lure of that lump sum prompted many pilots to put in for retirement before Delta filed for bankruptcy protection last September. But a shortfall in the pension fund has prevented pilots from cashing in their lump sums since Oct. 1.

"If the pilot plan is not terminated and the lump sum door reopens, Delta will immediately face a huge wave of pilot early retirements by its most senior pilots," Delta said in its filing Friday.

Delta said it would have to cancel thousands of flights if that happened.

"Delta likely could not survive an operational disruption of this magnitude," the airline said
 
This so incredibly unfair to the pilots. The maximum pension that the PBGC can pay is something like $45,000/yr. AND, if you retire before age 65, there is a penalty which means you receive less than that. And, no there is no provision for people in jobs, such as pilots, where you are forced to retire before 65.
 
This so incredibly unfair to the pilots. The maximum pension that the PBGC can pay is something like $45,000/yr. AND, if you retire before age 65, there is a penalty which means you receive less than that. And, no there is no provision for people in jobs, such as pilots, where you are forced to retire before 65.

I agree, $29000.00 per year at age 60.And no social security. And while Delta worries about possible cancellations and pilots wanting their already earned lump sums, maybe they should also worry about a work to rule action in this eleventh hour maneuver.
 
A question.

Though the pilots agreed NOT to oppose DL from terminating the Pilots DB plan, could the BK court, very Mindful that DUMBYA just signed a new pension relief bill, tell DL that it's "not necessary" to terminate ANY DL plans ??

thanks.

NH/BB's
 
A question.

Though the pilots agreed NOT to oppose DL from terminating the Pilots DB plan, could the BK court, very Mindful that DUMBYA just signed a new pension relief bill, tell DL that it's "not necessary" to terminate ANY DL plans ??

thanks.

NH/BB's
Sure, but DAL is scared that the run on the defined plan lump sum WILL put their cash position in the red zone. That coupled with any funding requirements under the bill could cause DAL to be between a rock and a hard place with exit financing options. Remember all DAL has to do is convince the BK court that the estate might not survive. I do not think the court will even consider the new pension relief bill. The court generally does not act as a medeator. Just rules on the merits of the filling, up or down. Although, if the court felt that the pilots were in a position to influence the successful exit of the estate, the court might justify its actions using the pension relief bill. DAL may be forced into a merger in either case. If the court rules in DALs favour, pilots might take this very badly. Work to rule, blue flu, etc. If court rules against DAL, mass retirements, hundreds of millions in lump sum, and requirement to upfund to min.statatory level. Also if they are talking to UAL or others about a merger the aquiring company may be compelling DAL to terminate. Also if DAL terminates PBGC will want their pound of back side equity, which as far as I know has not been discussed yet.
 
Hence the topic starter...."NOT good for DL" !!!

I wish :shock: :shock: World Traveler would "speak" to this "anomaly" :blink: :blink:
 
isn't it nice to be wanted!

DL told the pilots a year ago that their pension plan could not be saved because of the lump sum provision in their plan, which does not exist in the non-pilot plan. You'll recall that DL had nearly 1500 pilots retire in order to get their $1-2M lump sum distributions. In order to erase the deficit, DL would have to contribute over a billion dollars a year. But the irony is that as soon as they erased the deficit, the pilots would be free to start retiring en masse again.

DL told the pilots the plan could not be saved. They also told the PBGC and they testified to that fact to Congress as they were asking for pension relief for the larger non-pilot plan.

As part of the contract that was ratified in June, DL agreed to offer the pilots a $650 million note to make up for most of the benefits they would lose by turning the plan over to the PBGC. DL also agreed to give the pilots a bankruptcy claim which will probably be converted into equity in the reorganized company.

Bottom line is that the pilots, the PBGC, and Congress were all told months ago that DL intended to terminate the pilot pension plan regardless of whether pension relief was passed. Congress obviously considered that it was worth saving the non-pilot plan at DL as well as all plans at NW in addition to the relief the bill provides AA and CO.

Even with the pension termination, DL pilots are still the highest paid of any airline that has filed bankruptcy in this decade. Because CO has frozen its pilot pension plan and will take advantage of pension relief legislation, only AA's pilots remain with a defined benefit pension plan. AA's pilots should be grateful for what they have because it is clear that the rich pension benefits pilots once enjoyed can no longer be sustained.
 
and that is why I AAdmire them. It really takes a great deal of bad luck and prolonged bad management to get an airline into serious trouble.

AA has consistenlty been able to know how long they could drag things out before they need to pull back from the edge.

The converse is that with good management, airlines can do very well. Many airlines have acted like regulated companies instead of the highly competitive companies deregulation made them almost 30 years ago.