Delta Air Lines granted court OK to terminate pilot pension plan, awaits PBGC approval

By Caroline Salls

Pittsburgh, Sept. 5 - Delta Air Lines, Inc. obtained court approval to terminate its pilot defined benefit pension plan, according to a company news release.

According to the release, because the Pension Benefit Guaranty Corp. if responsible for plan termination, Delta now must secure the pension agency's approval before the pilot plan can be terminated.

While a timetable to attempt to secure PBGC approval has not yet been established, Delta said it plans to establish Sept. 2 as the pilot plan termination effective date.

Delta said U.S. Bankruptcy Court for the Southern District of New York judge Adlai Hardin issued his ruling after pilot retiree group DP2, the last remaining group opposing termination of the pilot plan, withdrew its objection over the weekend.

"The court's order, together with the broad-based consensus not to oppose the termination of the pilot pension plan, is significant and validates the company's need to take this course of action in order to survive," executive vice president, chief financial officer and head of the company's in-court restructuring Edward H. Bastian said in the release.

"It is a move Delta does not take lightly. It is an unfortunate but necessary step in Delta's restructuring, and we regret the impact of termination on active and retired pilots."

In connection with the DP2 group's decision to withdraw its objection, Delta said it will pay DP2 about $500,000 on account of the pilot retiree group's legal fees and other expenses.

While the Airline Relief Act would give the company the opportunity to preserve the defined benefit pension plan for its roughly 91,000 active and retired flight attendant and ground employees, Delta said the legislation's airline provisions did not provide the same opportunity for its pilot plan because of the plan's key features and unsupportable costs.

Under the terms of Delta's pilot defined benefit pension plan, pilots may retire at age 50 and take out half of their total retirement benefit in a lump sum payment and receive the rest as an annuity.

"Unfortunately, the Airline Relief Act provisions provide no relief from the unaffordable costs resulting from the pilot plan's lump sum feature - expected to exceed more than $1 billion in the near term alone - that would confront Delta upon emergence from bankruptcy and beyond were the pilot plan not terminated," Bastian said in the release.

The company has estimated that even with the termination of the pilot plan, current Delta pilot retirees will receive an average of about $75,200 in annualized pension benefits, including the value of the lump sum.

Delta also said it is 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 "barring any unforeseen disruptions," plans to emerge from bankruptcy by mid-2007.

Delta, an Atlanta-based airline, filed for bankruptcy on Sept. 14, 2005. Its Chapter 11 case number is 05-17923.

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