Delta and Northwest airlines will see the biggest immediate impact of the Pension Protection Act. The companies say the new law will save most of their pension plans.
Both airlines, which are reorganizing under Chapter 11 bankruptcy-court protection, had threatened to soon terminate plans covering a total of 164,000 employees and retirees.
Northwest CEO Douglas Steenland called the bill's passage "an important victory for our employees and a milestone in the restructuring of our company."
Delta and Northwest would not have been the first troubled airlines to terminate their plans. US Airways and United Airlines terminated all their pension plans during their recent bankruptcy reorganizations. The action by United, the USA's second-biggest airline, was the biggest corporate pension default in U.S. history.
But Delta, the USA's third-biggest carrier, and Northwest, the fifth-largest, had argued they could save most of their underfunded pension plans if they had more time to adequately finance their plans, reducing their annual cash outlays. The pension act will give both carriers 17 years to fully fund their plans, vs. seven years for most other companies. Delta and Northwest have frozen their pension benefits so the debt can't continue to grow.
The act gives American and Continental, whose plans are not frozen, 10 years to fully fund their plans.
The act won't, however, save the pilots' plan at Delta, which is underfunded by billions of dollars. Delta says it would not be able to attract exit financing from banks with that huge debt intact.
Late Friday, Delta petitioned the federal bankruptcy judge for permission to terminate that plan, which covers about 13,000 active and retired pilots.
If the court agrees, Delta will turn the pilots' plan over to the federal Pension Benefit Guaranty Corp., which insures benefits up to a limit. Some pilots could lose tens of thousands of dollars a year in benefits.