NEW YORK_A federal bankruptcy judge on Thursday approved a plan by Delta Air Lines Inc. to cut $50 million (€39.8 million) a year in health benefits for about 42,000 retirees, spouses and survivors.
America's third-largest carrier, which is operating under bankruptcy protection, reached agreements with retiree representatives on Oct. 5 that affect retired pilots, ground crew workers and flight attendants. The cuts would be effective Jan. 1.
"It's good news in a bad-news situation," said Alisa Lacey, an attorney who represents retired pilots. "It's better news than we could have litigated for."
Delta has sought cost cuts as it tries to emerge from court protection by the middle of next year, and reductions in retiree benefits have been a particularly contentious issue.
Judge Adlai Hardin considered a motion from the airline at a hearing, but said the statute that governs modifications to retiree benefits did not require his approval since the cuts would result from consensual agreements.
Attorneys for Delta said they sought the court's approval out of "an abundance of caution." Hardin signed an order that endorsed the plan as being in the debtor's best interest.
Two official committees representing retirees endorsed the proposal after several months of what Delta attorney Benjamin Kaminetzky calld "brutal" negotiations.
Some non-pilot retirees, who currently do not pay any health insurance premiums before age 65, would start out paying $115 (€92) a month, with payments rising over the next few years to 22 percent of the full cost of coverage until they turn 65. Other retirees would pay an increasing amount, up to 25 percent or 35 percent of the total cost.
Retired pilots will also see changes to medical benefits under the agreement. Delta will pay 100 percent of costs for those under age 60, and 28 percent to 51 percent for those between 60 and 64. Those over 65 would get a monthly subsidy.
The company has lost more than $16 billion (€12.7 billion) since January 2001. It filed for bankruptcy on Sept. 14, 2005, amid broader problems in the industry stemming from greater competition and higher fuel costs.
Delta has sought cost cuts as it tries to emerge from court protection by the middle of next year.
Delta recently stopped sending monthly pension checks to about 1,300 retired pilots as a result of the pending termination.
A hearing is scheduled for Oct. 19.
Delta must now go before the two retiree committees as well as its creditors as it goes through the bankruptcy process.