Some retired Delta Air Lines pilots will get about $800 million in claims in the carrier's bankruptcy case to compensate them for lost pension benefits, airline and retiree representatives said Monday.
"It's remarkable," said Jim Gray, leader of DP3, a group representing more than 3,100 retired Delta pilots. "We were able to reach an agreement that avoids the costs and risks of litigation. The response among our people has been overwhelmingly positive."
Delta said its unsecured creditors committee agreed to a retired pilot claim of $719 million, bringing the total to around $800 million, including previously negotiated amounts.
Such claims are typically paid at a rate on the dollar, which has not yet been determined as part of Delta's Chapter 11 case.
Delta debt currently trades for about 55 cents on the dollar.
Retired pilots will have the option of selling Delta debt on the open market or accepting stock in the reorganized Delta when the company emerges from bankruptcy court protection, Gray said. Delta expects to get out of Chapter 11 early next year.
At issue are so-called nonqualified pension benefits that Delta stopped paying after filing for Chapter 11 protection in September 2005. Nonqualified benefits are the portion of pension payments that aren't covered by federal law preventing companies from cutting basic benefits.
DP3 fought the move in court, leading to talks about claims.
"We are extremely pleased that our work with these groups to secure claims ... was successful," Delta finance chief Ed Bastian said in a company statement. "As a result of this effort, our retired pilots will recover through the claims process a significant portion of their unpaid nonqualified benefits."
The issue is separate from the termination of the pilots' traditional pension plan, which was approved by Delta's bankruptcy judge. Termination frees the company from the need to fund its pilot pension plan, while retired pilots get continued benefits up to certain limits from the federal pension insurance agency. However, pilots who took large lump sums when they retired may face no further payments under rules of the program.
Delta's pilots union negotiated a separate bankruptcy claim related to the termination.
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