Airlines Put Pressure on Senate over Pension Bill

American and Continental face off against Delta and Northwest.


Four big airlines with ailing employee pension plans continue to exert powerful political pressure on the U.S. Senate as it considers legislation to reform the nation's retirement system.

As a result, enactment of a sweeping reform bill months in the making depends to a great extent on the outcome of a ferocious lobbying battle involving airlines with competing interests: Delta and Northwest on one side; American and Continental on the other.

Senate Majority Leader Bill Frist, R-Tenn., has told colleagues the Senate must pass the bill in its current form this week because senators are scheduled to adjourn Friday for the rest of the summer. The House overwhelmingly approved the bill last week before leaving town.

The bill pending in the Senate would increase companies' pension insurance premiums and generally require that underfunded plans be brought into compliance within seven years.

But the legislation would give Delta and Northwest, both in Chapter 11 bankruptcy, 17 years to fully fund their plans. The bill would give American and Continental airlines 10 years. Supporters of Northwest and Delta say the longer period rightly rewards the airlines' decision to freeze benefits, limiting liability.

The two Texas-based carriers, American and Continental, are pressing senators to alter the bill so all airlines are treated the same.

Atlanta-based Delta is running letters today from CEO Gerald Grinstein as paid advertisements in newspapers in four states, urging passage.

Wednesday, Continental was "working the Senate fast and furiously," according to an e-mail from Continental lobbyist Nancy Van Duyne to several supportive House members.

The arm-twisting follows a recent event by Northwest, in which hundreds of employees went to Washington to lobby lawmakers. Northwest and Delta have threatened to use the bankruptcy laws to dump their pension plans on the federal pension insurance agency unless they get more time to pay for them.

Already, US Airways and United Airlines have used bankruptcy court to cut costs by terminating all their pension plans and turning them over to the federal Pension Benefit Guaranty Corp.

The PBGC, which insures failed plans, itself has an estimated deficit of $23 billion because so many large companies have terminated their plans. Altogether, defined-benefit pension plans offered by U.S. companies are underfunded by an estimated $450 billion.

Without stricter rules, reform advocates argue, pension defaults could overwhelm the PBGC just as the savings-and-loan crisis forced the Federal Savings and Loan Insurance Corp. into insolvency in 1989.

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