$70M Payment to Delta Plan OK'd

WASHINGTON -- The judge overseeing the Delta Air Lines Inc. reorganization approved a $70 million payment to the air carrier's benefit plan that is pivotal to a settlement with the U.S. Department of Labor.

An order last Thursday from Judge Adlai S. Hardin Jr. of the U.S. Bankruptcy Court in Manhattan approving the payment will resolve a dispute with Labor Secretary Elaine Chao and eliminate the possibility of a departmental probe or protracted litigation that would detract from the airline's restructuring effort.

Atlanta-based Delta, which has a hub at Salt Lake City International Airport, has been operating under Chapter 11 protection through the U.S. Bankruptcy Court in Manhattan since September 2005 and must receive Hardin's approval before disbursing cash.

The Labor Department's interest in Delta stems from the carrier's use of funds from its family-care disability and survivorship plan to cover the cost of severance payments made to employees in the aftermath of the terrorist attacks of Sept. 11, 2001.

According to Delta, the family-care plan has existed for about 30 years and provides disability, life insurance and monthly benefits to eligible surviving family members.

Court papers say Chao and Delta officials have been in talks over the appropriateness of using the family-care funds to cover the severance payments.

Delta said the settlement isn't recognition that it acted inappropriately but an attempt by the air carrier and the department to avoid costly, time-consuming court battles.

Under the settlement, Delta's payment to the family-care trust will be given administrative status, meaning it will be among the first disbursements of cash made according to a reorganization plan.

Delta has said it's on track to exit bankruptcy by the middle of 2007.

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