Airlines Pension Deal Eludes Congress

Senate and House lawmakers will miss their self-imposed July 4 deadline to complete pension reform legislation, leaving financially troubled airlines uncertain about the fate of their pension plans.

Sen. Johnny Isakson, R-Ga., primary sponsor of the bill's airline-relief provision, said Friday that he is "frustrated" but still has "every confidence" Congress will act in time to help carriers avoid more pension-plan defaults.

House Majority Leader John Boehner, R-Ohio, told reporters this week that lawmakers have not yet been able to reach compromises to finish the legislation.

In an interview last month with the Atlanta Journal-Constitution, Delta Air Lines financial chief Ed Bastain said that unless Congress finished the legislation by late summer, the company might have to terminate the pension plan covering 91,000 current or retired ground workers and flight attendants. In June, the bankrupt company started the legal process to end the pilots' plan.

Finishing the bill this summer may be difficult, because Congress has left for a week-long break and will also recess for August, leaving just three weeks in July to complete the complex bill.

"Delaying until September or October would be problematic" for financially fragile Delta, Isakson said.

Delta spokeswoman Betsy Talton agreed, saying that "if the pension legislation is passed before the August recess, Delta will have its best chance to fund its own nonpilot pension obligations."

The House and Senate have each passed legislation to shore up the Pension Benefit Guaranty Corp., an agency that insures private pension plans.

The PBGC's solvency has been undermined by steel and auto-related companies and airlines that have filed for bankruptcy and dumped their pension obligations. For example, US Airways Group Inc. and UAL Corp.'s United Airlines already have used bankruptcy to transfer liabilities to PBGC.

The agency now has a deficit exceeding $23 billion. That figure could soar, because U.S. companies have $450 billion in underfunded pension promises.

To head off a potentially massive government bailout, Congress wants to tighten up funding rules for companies with traditional pension plans, which promise to pay monthly benefits to 44 million Americans based on their income and years of service.

But because the House and Senate each passed different versions of reform, negotiators must smooth out differences to produce final legislation. They began meeting March 8, but the wrangling has dragged on.

One of the most contentious issues involves the Isakson amendment allowing financially weak carriers to take 20 years, rather than seven, to replenish underfunded pension plans.

In a mid-June interview, Isakson said his provision was safely attached to the bill. But subsequently, "there was a little dust-up with some people at the White House" who wanted the amendment killed, he said.

Amendment opponents fear that giving airlines more time to fund pensions would only increase the PBGC's potential liability.

This past week, a Washington Post editorial condemned the Isakson amendment, and a Wall Street Journal editorial said it would allow airlines to "continue to dig deeper pension holes." Both papers called for a presidential veto if the legislation contains airline relief.

Isakson disagreed with the editorialists' reasoning.

"This is really pretty simple," he said. "If we don't do this (amendment), then it is 100 percent guaranteed that airlines will go to the PBGC" to dump their pensions, he said. "You're talking about huge obligations" that could swamp the agency.

But if Congress approves the legislation in July, then there will be hope for "the 91,000 people whose pensions are at stake at Delta," he said.

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