Delta Air Lines has received the green light to end its pilots’ pensions by the Pension Benefit Guaranty Corporation(PBGC). The airline said it needed to terminate the pension plan to emerge from bankruptcy next spring.
The PBGC will take over the airline’s pensions and pay pilots part of the benefits they expected. According to the insurer, those pensions were underfunded by an estimated US$3 billion.
The agreement between the PBGC and Delta is effective retroactive to Sept. 2 and affects about 13,000 current and former pilots.
Delta attorney Marshal Huebner said that more than 97% of retirees with qualified pension plans will receive at least 86% of their total estimated compensation, and more than 35% of the 6,300 retirees will be fully compensated.
Those retirees who hold unqualified plans would have an $810 million pre-petition claim, Huebner said, but it’s unlikely to be paid in full.
The PBGC cannot revoke its adoption of the pensions once the airline is free from bankruptcy. Delta, on the other hand, cannot create any new tax-qualified defined benefit pension plans for pilots for five years.
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