The pension plan for Delta Air Lines' pilots probably will be terminated before October to avoid more cash drains from pilot retirements, said an actuary for Delta Air Lines' pilots union.
Even if pension relief legislation passes next month, the union's expert told a panel of arbitrators, the Pension Benefit Guaranty Corp. is likely to take over the pilots' pensions by next year if Delta continues to skip contributions into a trust fund to pay pension benefits.
"The PBGC will step in at that point, if they haven't already, to protect their own interests," said Jack Parrack, an actuary for the Air Line Pilots Association.
He testified on the sixth day of an unusual hearing on Delta's request for a new round of deep pilot pay cuts and other concessions as part of its turnaround plan. A three-man arbitration panel is to decide whether the airline should be allowed to void the current pilot contract and impose new cuts.
Meanwhile, Delta Chief Executive Gerald Grinstein told European journalists at a Delta-sponsored conference Monday in Atlanta that he believes Delta will reach a settlement on a new labor contract this spring. ALPA officials, meanwhile, scrambled to send union members to picket outside the Woodruff Arts Center, where a conference dinner was to be held Monday night.
The pilots union is resisting Delta's demands for more than $300 million in annual concessions, and threatens to strike if cuts are imposed.
Company and union negotiators have not resumed talks that were halted before arbitration hearings began last week, said ALPA Chairman Lee Moak. "They're not negotiating," said Moak, who attended Monday's proceedings at a hotel in downtown Washington.
Delta executives testified last week that the carrier can't compete long term without concessions.
Delta wants $305 million in annual concessions for four years, including an 18 percent pay cut. ALPA has proposed concessions it says average $140 million annually. Delta has also offered pilots a $330 million long-term IOU after the airline emerges from bankruptcy if their pension plan is terminated. Delta says ALPA has asked for a $1 billion note, but the union says the value hasn't been determined.
Until recently offering the $330 million note as partial compensation, Delta had insisted that the pay cuts and threats to pilots' pensions were separate issues. The union has long contended that the pilots' pension plan would be terminated and taken over by the PBGC, and should be included in the concession talks.
Last week, Delta executives testified it is likely that the pilots' plan will be terminated. The airline said about 800 pilots could retire this fall -- far above the few dozen that typically retire each month -- and take half of their pension bene?fits as cash lump sums, costing the plan perhaps $400 million.
Delta sought to keep the pension issue separate because it's "not a day-to-day operating issue," said spokesman Bruce Hicks. "We brought it to the talks as soon as it was clear that the current plan was at grave risk."
More than 500 pilots retired last year as fears grew that Delta would file for Chapter 11. The exodus drained the pension plan of hundreds of millions, until a cash shortfall caused the pension plan's administrator to halt lump sum distributions.
Both the company and union say distributions could become possible again on Oct. 1 under the pension plan's rules, triggering another wave of pilot retirements.
Parrack said the PBGC will probably step in before that to seek an "involuntary" termination of the pilots' plan. The agency guarantees pension benefits for participants in plans it takes over, up to roughly $47,000 a year for someone who retires at 65. Parrack said pilots, who must retire at 60 under federal law, would get no more than $30,978. Currently, some retired Delta pilots qualify for pensions of more than $100,000 a year.
Delta Air Lines' pilots will begin presenting their case to arbitrators today in hopes of halting the carrier's efforts to impose more than $300 million in pay cuts and other concessions.
A demand by Delta Air Lines for more than $300 million in contract concessions probably wouldn't be ratified even if negotiators agreed to it, a pilots union official said.
The deep pay cuts pilots at bankrupt Delta Air Lines have accepted may be the least of their worries: their retirement benefits are in jeopardy as well.
Company and union leaders sent letters to their pilots encouraging them to come together as Delta looks to emerge from Chapter 11 in early 2007.