Delta Warns Against Pension Agency Opposing Pilot deal

Delta Air Lines' chief executive says a government agency's objection to its proposed pilot contract is ill-founded and should not be allowed to derail the deal.

The federal Pension Benefit Guaranty Corp. last week filed the objection with Delta's bankruptcy judge. The PBGC argues that a promise of notes worth $650 million to the pilots union to compensate members for the likely termination of their pension plans violates employment and bankruptcy laws.

Delta CEO Gerald Grinstein on Friday sent a letter to pilots seeking to reassure them the company stands by that part of the proposed deal, which pilots are now voting on.

Grinstein added: "Without this deal, Delta Air Lines is at grave risk and the PBGC and potentially, the U.S. taxpayer and all our employees will lose out in the long run if this company is put in jeopardy as a result of their objection."

He added he is "confident that we will prevail on this objection."

The Air Line Pilots Association also has said it will "vigorously oppose" the PBGC's objection.

Judge Adlai Hardin is scheduled to hear the objection next Wednesday, the same day ALPA will announce results of the ratification vote. Hardin must approve the deal for it to take effect.

The PBGC has a stake in the issue because it takes over benefits payments, up to certain limits, when company's terminate pension plans.

In Delta's case, a pilot pension plan termination would result in reduced benefits for most pilots because their retirement income would exceed PBGC caps. That led the company and the union to negotiation compensation as part of the new contract.

Delta has a separate pension plan for nonpilots and executives say they have not decided whether to seek its termination as part of their Chapter 11 recovery plans. Terminating plans allows companies to avoid large cash outlays needed to keep enough money in them to cover future liabilities. Delta's plans are severely underfunded and it faces large make-up payments.

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