Airlines Want to Honor Duty to Pensioners

Delta and Northwest want to honor their pension obligations to the thousands of retirees and employees who built the airlines and kept them flying.


What if there was a solution that would allow troubled companies to fulfill their promises, preserve the retirement pensions of hundreds of thousands of workers, and save taxpayers billions of dollars---but nobody cared?

Unfortunately, that is what the current stall in passing pension reform looks like from the outside. A comprehensive reform of U.S. pension laws separately passed both the House and the Senate this year, but in different forms. But there is no agreement yet on a final version.

As part of the Senate version, Sen. Johnny Isakson (R-Ga.) introduced bipartisan legislation that would give Atlanta-headquartered Delta Air Lines, Northwest Airlines, and other U.S. air carriers 20 years to make up current funding shortfalls in their defined benefit pension plans. They need that time. Both Delta and Northwest are in bankruptcy. Delta has said that Isakson's legislation (along with the House Bill sponsored by U.S. Rep. Tom Price (R-Ga.), currently stalled in conference committee, is the only hope to avoid terminating the pensions of over 91,000 employees and retirees. Northwest is in a similar position.

And Delta and Northwest pension terminations would leave much of their pension liabilities with the Pension Benefit Guaranty Corp., which is already staggering under the billions of dollars of liabilities after termination of the US Airways and United Airlines pensions in their bankruptcies.

With the additional Delta and Northwest pension liabilities, the PBGC may need a taxpayer bailout itself. But unlike United, which used its bankruptcy specifically to dump its pension liabilities, Delta and Northwest support a bill that will give airlines additional time to meet their funding obligations as the way to avoid similar pension terminations in their bankruptcies.

As old-fashioned as it sounds, both companies want to honor their pension obligations to the thousands of retirees and employees who built the airlines and kept them flying. And those retirees and employees need all of their pensions, not just the minimum amounts guaranteed by the PBGC. Except for pilots, most airline jobs don't pay especially well. For many Delta retirees and employees, though, the job came with good lifetime travel, medical and pension benefits that they earned over decades of hard work. But that's all at risk now with Delta's bankruptcy filing and stalled pension reform.

Critics of Isakson and Price's bills have suggested that it only puts off the day of reckoning, and that it may cost taxpayers in the end, by letting underfunded pension obligations grow. But that view ignores three realities. First, the airline business is cyclical --- like the automotive and some other industries, it has a cycle with regular large ups and downs in profitability. Rigidly enforcing minimum contribution requirements for a cyclical business in bad years, especially while limiting tax deductions for excess contributions in good years --- as U.S. law does --- essentially guarantees collapse of the pension over time.

Second, the PBGC already has the power to protect taxpayers from growing liabilities in airline pensions, because the PBGC has the involuntary termination power, by statute, to take over pension plans if the loss to the PBGC is expected to increase unreasonably if the plan is not terminated. Third, and most important, the Delta and Northwest pensions are almost certain to terminate without passage of this reform legislation in a form that includes more time for the airlines to meet their funding obligation provisions. This is not the case of a business asking for a government handout or even for debt relief --- Delta and Northwest can get that debt relief already, in their bankruptcy proceedings. They are only asking for some more time and for an opportunity to honor their commitments.

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