A bankruptcy judge on Tuesday approved an agreement between Delta Air Lines Inc. and a group of retired pilots that paves the way for the airline to pay $9 million in pension obligations.
The deal was presented ahead of a hearing that begins next Friday, when Delta will ask the court to terminate its obligations under qualified pension plans. The company anticipates heated opposition from retired pilots who oppose the motion.
The pilots group, the Delta Pilots' Pension Preservation Organization, withdrew earlier objections to reach a deal with the airline late last month.
The group, called DP3, represents about 2,850 of 5,300 retired pilots, a lawyer for the company said. Of those, 3,642 are eligible for payments from the $9 million fund, which is worth roughly 11.5 percent of the total value of non-qualified pensions as of last September.
At the Tuesday hearing, Judge Adlai Hardin also heard arguments over a dispute between Delta and the U.S. General Services Administration about a bill the agency believed it shouldn't have to pay.
The government asked the court permission to withhold payment of $23.8 million it owes for tickets mostly bought in the fall of last year. It argued that it should be allowed to deduct that amount from $26.2 million it overpaid for tickets that went unused, mostly in 2001 and 2002.
Pierre Armand, an assistant U.S. attorney in the Southern District of New York, argued that the Transportation Act supports the government's right not to pay.
"Delta is asking this court to permit it to violate a federal statute entitling the government to adjust Delta's present and future bills to account for the public funds that Delta wrongfully received," the U.S. attorney's office argued in a court filing.
Hardin did not rule on the matter before adjourning.
As part of the pension agreement, the retired pilots also have the right to pursue an unsecured claim to seek an estimated $75 million, the equivalent value of pensions accruing at $7 million a month beginning at the time Delta entered bankruptcy in September 2005.
"The vast majority are very pleased that DP3 was able to get them, from our perspective, $9 million real extra dollars by virtue of their tenacity," Delta attorney Marshall Huebner said in court about the retired pilots group's advocacy.
Delta will be helped by a bill to overhaul pensions that was signed by President Bush on Thursday. Among other items, the new law gives bankrupt airlines, which have frozen their plans, an additional 10 years, for a total of 17, to meet their funding obligations.
Other airlines that have active plans have 10 years.
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