Struggle to Save Benefits a Huge Task for Delta Retirees

Delta retirees say that the company is now a tough, pragmatic adversary, unlike the paternalistic airline that hired them decades ago.


Pilots offer guidance

One place Cone looked to for guidance in mid-2003 was a newly formed group of retired Delta pilots that had decided to band together after seeing US Airways terminate its pilots' pension plan while in Chapter 11 proceedings in early 2003.

Ex-Delta fliers wanted their own organization "to litigate, if that became necessary," said Gray, who was elected the group's chairman the following year.

Gray had retired at 60, the mandatory retirement age for pilots, after a career capped by flying as an L-1011 captain between the United States and Japan and Europe. But like Cone he didn't disconnect from company issues and soon became involved in DP3.

He'd been active for much of his career in the pilots union, the Air Line Pilots Association. He was the first editor of the Widget, a union magazine for Atlanta-based pilots, and a leader on the Atlanta executive council.

But he says that activism didn't prepare him for being chairman of DP3 since Delta filed for Chapter 11 protection nearly a year ago.

"It is more than a full-time job. It is all-consuming," said Gray, now 63. He says he has frequently worked 40-60 hours a week in the unpaid position and has lost count of how many court hearings he's attended.

DP3's 2,800 members contributed up to $1,000 each over three years. Gray said the group's top budget item is legal expenses. He is also reimbursed for much of his travel expenses.

DP3 has suffered its share of setbacks in the case.

Over DP3's objections, soon after Delta filed for Chapter 11, the airline got court clearance to stop paying part of the retired pilots' pensions. Delta also fought DP3's request for a court-appointed creditor committee to represent retired pilots in negotiations over changes in medical and other benefits. The court eventually appointed such a committee, but DP3 got only a minority of the seats.

Finally, in a blow to retired pilots' hopes of keeping their pension plan, Delta cut a deal in which ALPA agreed not to fight termination of the plan in exchange for a $650 million IOU and claims on future stock. The proceeds are expected to be distributed to active pilots.

DP3 concluded it wouldn't be able to block Delta from terminating their pension plan, and settled last month for $9 million in cash plus an unsecured claim for $68 million. Delta will eventually divide the settlement among about 3,600 retired pilots who had been receiving certain monthly pension benefits that Delta halted when it filed for bankruptcy.

"By definition, a bankruptcy court is so predisposed toward what a debtor says that it needs," said Gray. "It's a real uphill battle."

It's not unusual that the group has had a tough time, agreed Atlanta bankruptcy attorney Darryl Laddin, who was involved in Eastern Airlines' bankruptcy.

"As a practical matter, in bankruptcy court, it's tough to win a battle when the dispute goes to the core issue of the survival of the company," said Laddin. Delta's pension liabilities "were key issues affecting its ability to reorganize."

Changing outlooks

Gray says he no longer sees either Delta or ALPA the same way.

"I love the company that hired me and that I worked for for 30 years," he said. "It's a very different Delta Air Lines that we deal with today," he added, one in which "retirees are a liability."

The union's decision not to fight pension termination was "a huge, huge disappointment," he said. "ALPA has abandoned retirees for 30 pieces of silver."

Cone's views also have evolved. Where Cone once talked with Delta CEO Gerald Grinstein "frequently," she says they no longer talk at all.

They stopped speaking after Delta and the retirees fought in bankruptcy court earlier this year over the fate of a benefits fund for disabled former employees and deceased retirees' spouses.

The court sided with Delta in a narrow legal decision that allowed the airline to use the fund to pay other employee-related expenses, but not before DALRC ran a full-page "open letter" in The Atlanta Journal-Constitution accusing Delta of questionable diversions of money from the trust.

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