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Delta Gets Court Approval to End Pilot
Pension Plan
Reuters
September 5, 2006
A U.S. bankruptcy court on Tuesday allowed Delta Air Lines Inc. (DALRQ.PK: Quote, Profile, Research) to terminate its pilots' defined benefit pension plan, clearing a major hurdle in its restructuring plans.
The airline must now seek the approval of the Pension Benefit Guaranty Corp., the federal pension insurer, to end the plan that covers more than 13,000 active and retired Delta pilots and their beneficiaries.
Delta said no timetable had been set for getting the approval of the pension insurer, but said it wants to end the plan effective September 2.
Atlanta-based Delta, which has been operating under bankruptcy protection since September last year, had argued that continuing the plan would jeopardize its ability to emerge from Chapter 11.
The company said that, if allowed to continue, the plan's costs could exceed $1 billion in the near term and argued that not terminating it would make finding lenders for exit financing difficult.
Judge Adlai Hardin issued his ruling allowing Delta to end the plan after DP2, a group of about 100 retired pilots, withdrew its objection to the termination, Delta said. The airline will pay DP2 about $500,000 for legal fees and other expenses.
The airline's pilots' union, representing more than 6,800 current pilots, already had agreed to the move.
The Pension Benefit Guaranty Corp., which would have to administer the plan, also did not oppose Delta's move in court.
Delta still needs to end the plan and hand over its administration to the PBGC.
An agency spokesman said mostly administrative issues remained. "It appears unlikely that anything will derail PBGC's becoming trustee of the plan," spokesman Randy Clerihue said.
Delta said it estimated that after the termination of the plan, pilot retirees will receive on average about $75,200 in annualized pension benefits.
The termination would not affect Delta's other defined benefit pension plan, covering about 91,000 active and retired flight attendants and ground employees.
Delta also said it was on track to realize more than two-thirds of its business plan's $3 billion in annual financial improvements by the end of this year, and planned to emerge from bankruptcy by mid-2007.
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