A group representing retired pilots is having second thoughts about its decision not to oppose Delta Air Lines' plans to terminate their pension plan.
The group, DP3, asked the federal bankruptcy court to delay a Sept. 1 hearing on Delta's request to terminate the pension plan. 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.
Delta wants to shed the deeply underfunded pension plan effective Sept. 2, shifting responsibility for further benefit payouts to a quasi-federal agency.
DP3's motion to oppose the termination came late last week, only days before a hearing set for today on the group's earlier pact with Delta. That agreement would have ended the retired pilots' opposition to dumping their pension plan on the Pension Benefit Guaranty Corp.
Several retired pilots opposed DP3's earlier deal, which will be reviewed today in U.S. Bankruptcy Judge Adlai Hardin's court in White Plains, N.Y. Delta's lawyers said all the retirees' objections have been resolved except that of former pilots union Chairman William Buergey. He is complaining that Delta's retired pilots will get too little compensation for lost benefits compared to their counterparts at United and US Airways, which also terminated pilots' pension plans.
DP3, also known as the Delta Pilots Pension Preservation Organization, agreed in May to drop most of its complaints against Delta in exchange for $9 million and an unsecured claim for certain retirement benefits that Delta stopped paying when it filed for Chapter 11 last year.
However, DP3 decided to renew its opposition to Delta's pension plans because of a provision in pension relief legislation enacted last week.
"One of the changes contained in its 900 pages of new provisions and amendments will alter governing pension law dramatically," the group said in a court filing. The law, it notes, would ban bankrupt companies from paying out lump sums to retirees if their pension plan is underfunded.
That provision doesn't take effect until 2010, but the group said that, if the hastily drafted bill is modifed through a "technical correction" or new legislation, it could offer relief to the airline and its retiring pilots.
Before Delta asked to terminate the pension plan, blocking that option, retiring pilots could cash out up to half of their pension benefits as a lump sum typically worth several hundred thousand dollars.
If lump sum payments were prohibited by law, Delta might be able to meet its pension obligations.
A spokeswoman for Delta said the new legislation may stop lump sums in the future but not soon enough to solve the carrier's problems.
"We believe that the new pension law clearly does not relieve the Delta pilot retirement plan of the requirement to make lump sum payments," said Gina Laughlin, with Delta.
Delta has previously argued that the new legislation would allow it to preserve non-pilot employees' pensions, but that the pilots' pension plan couldn't be salvaged because the lump sum feature is too costly.
In its court filings, Delta said if the pension plan is not terminated, mass pilot retirements this fall could disrupt operations and cause a cash drain of up to $2 billion. Delta said that threat will scare off future lenders, wrecking its plans to emerge from bankruptcy next year.
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