Delta, Northwest CEOs Appeal for Pension Relief
Chief executives of two bankrupt airlines warned House and Senate negotiators on Wednesday, July 19, that failure to include airline relief in pension reform legislation would force them to terminate their defined-benefit plans.
Delta Air Lines CEO Gerald Grinstein and Northwest Airlines president and CEO Douglas Steenland say that they are trying to maintain their frozen pension systems while reorganizing their companies.
But they assert that Congress must allow them a longer timeline to return their plans to 100 percent funding.
"We're at the tipping point," Grinstein said at a Capitol Hill press conference. "We have to know very soon whether we're going to get this legislation."
In a letter to Sen. Johnny Isakson, R-Georgia, both airlines argue that "catch-up" payments that are required under current law for underfunded pensions threaten "our companies' viability and our ability to exit from bankruptcy."
The Senate approved pension reform legislation in November that would give the airlines 20 years to shore up their pension plans. The House pension bill does not include a similar provision. Other companies would have seven years to fund 100 percent of their pension promises.
A conference committee that was formed in March to reconcile the measures has missed several self-imposed deadlines. Delta and Northwest are urging legislators to reach an agreement before the August congressional recess.
The conference might meet that goal. One prominent senator nixed his meeting on Wednesday with Grinstein and Steenland so that he could remain in negotiations.
If Congress gives the airlines more breathing room, "we can preserve the frozen defined-benefit plans, a very significant accomplishment," Steenland says. "A further delay is the moral equivalent of 'no.' "
Without help, Delta and Northwest say they would have to dump pensions affecting more than 150,000 employees and retirees onto the federal Pension Benefit Guaranty Corp. US Airways and United Airlines have already made that move, contributing to the PBGC's nearly $23 billion deficit. The Bush administration estimates that U.S. pensions are underfunded by $450 billion.
The complex pension reform legislation deals with funding rules, cash-balance plans, investment advice, tax reform and other issues.
"The airline provision is driving this conference," says Sen. Norm Coleman, R-Minnesota.
As an example of that momentum, Northwest chartered two planes to bring 225 employees to Capitol Hill on July 18. They conducted about 100 meetings with members of Congress and staff. The lobbying partnership between airline management and unions contrasts with sometimes tense relations during bankruptcy negotiations. After the Capitol Hill press conference, Grinstein, Steenland and union officials huddled for about 10 minutes.
"We appreciate both the CEO's contribution to pension legislation along with Sens. Isakson and Coleman," says Capt. Dave Stevens, chairman of the Northwest pilots union.
As the conference committee commenced in March, the White House threatened to veto reform that it deemed too weak. But Isakson asserted that the Bush administration would acquiesce to giving the airlines a break.
"The White House will sign the bill," Isakson says.
Another potential airline opponent, House Majority Leader John Boehner, R-Ohio, seems to be leaning toward the airline position.
"I have been supportive of reasonable and responsible relief for troubled industries for some time," he says.
--Mark Schoeff Jr.