Delta Air Lines Inc. is defending itself against objections filed by retired pilots to the company's bankruptcy court request to terminate its pilot pension plan.
A hearing on the Atlanta-based company's motion is scheduled for Friday. Delta has asked for the termination of the plan covering active and retired pilots to take effect Saturday.
Active pilots agreed not to object as part of a concessions package worth $280 million (euro218 million) a year first reached in April. The Pension Benefit Guaranty Corp., the government's pension insurer, has not objected, but says in a court filing that Delta should meet strict criteria before a judge approves the request.
The official committee of unsecured creditors in the bankruptcy case has filed a motion supporting Delta's request to terminate its pilots pension plan.
Delta's effort to terminate its pilots pension plan, which is significantly underfunded, had been expected, as the America's No. 3 carrier seeks to emerge from Chapter 11 bankruptcy restructuring by the middle of 2007 a leaner airline. UAL Corp.'s United Airlines, the No. 2 U.S. carrier, terminated its pilots' pension when it was in bankruptcy protection. Delta has said a pension relief bill passed by Congress and signed by President George W. Bush should help it save its pension plan covering employees other than pilots.
Delta has promised its pilots a $650 million (euro507 million) note in the event the pilot pension is terminated. Delta also has promised the pilots a $2.1 billion (euro1.64 billion) unsecured claim.
But a number of retired Delta pilots have filed individual objections over the last several weeks to Delta's pension termination request. A group representing more than 100 retired pilots has also filed an objection. One of their chief concerns is that their current pension benefits could be cut if the pension liability is turned over to the PBGC.
Meanwhile, a group that represents 2,850 retired pilots has filed a request to delay Friday's hearing, but has not objected outright to Delta's request. Delta, meanwhile, filed a lengthy response Wednesday defending the company's request and insisting there be no delay.
If the court in New York approves Delta's request to cancel its pilots' pension, the PBGC would take over the plan and pay active pilots a reduced benefit based on when they retire and other factors. Retired pilots may receive a reduced benefit. A Delta court filing and the PBGC differ on calculations of how much pilots will receive after termination. A PBGC spokesman said the actual amount of benefits will not be known until after the plan is terminated, and that the benefit will depend on individual factors and the limits under the law.
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. A liquidity shortfall in the pension fund prevented pilots from cashing in their lump sums after Oct. 1, 2005, and the door has not reopened since.
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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...
The group argued that it needs more time to study pension relief legislation signed into law last week that could open a way for Delta to save the pilots' pensions.
The airline will ask a bankruptcy judge today to let it drop the plan. But critics will weigh in.