Wednesday's announcement "increases the urgency for congressional action to ease requirements of the pension system," said Sen. Bob Bennett, R-Utah. "Now is the time for interim measures that will protect employees from possible long-term disaster."
The bankruptcy filings may jeopardize the pension system in place for Delta and Northwest employees, and they follow United Airlines' default on its pension program this summer. The federal government's taxpayer-funded safety net program, the Pension Benefit Guaranty Corp. (PBGC), already faces a $23 billion deficit.
"The airlines have struggled to recover from the impact of Sept. 11, and the rising cost of jet fuel has made that increasingly difficult," said Sen. Orrin Hatch, R-Utah.
"Congress should give the airlines more time to fund their pension plans, rather than shifting them to the PBGC. But they shouldn't be allowed to keep digging the hole deeper."
Hatch, however, isn't backing another congressional bailout. The government gave the industry a $15 billion subsidy after the Sept. 11 attacks and Congress since has resisted another one.
All three of Utah's U.S. House members are co-sponsors of a bill that would allow airlines to fund their pension obligations over a 25-year period while freezing current benefits. Any increase to benefits would have to be paid for immediately.
The Employee Pension Preservation and Taxpayer Protection bill is awaiting action in a House subcommittee and a companion bill is sitting in a Senate committee.
Utah's lone Democrat in Congress, Rep. Jim Matheson, called the bill a "sensible solution."
Rep. Chris Cannon, R-Utah, says he doesn't support another billion-dollar subsidy, but he added that Congress needs to review some of the mandates and other "burdens" placed on the industry.
"Our job should be encouraging airline success, not encouraging bankruptcy," Cannon said.
tburr@sltrib.com
Q: What will happen to Delta's pension plan?
A: In the short term, nothing. Active employees would not lose vested benefits and retirees would continue to receive payments. However, Delta's pension - underfunded by $5.3 billion - is a huge liability that must be addressed.
Q: Why?
A: Delta has what is known as a defined benefit pension plan that guarantees workers a certain level of income for the rest of their lives in retirement, based on annual salary and length of employment. As life expectancy increases, such pensions become more expensive. During good economic times, companies have used asset growth to fund pension plans and avoided making cash contributions. Then, when the economy or the stock market entered a downturn, pension assets declined in real value, putting companies in a pinch and prompting them to further delay contributions.
Q: What is the solution?
A: The company is seeking congressional approval to stretch pension payments over 20 to 25 years. If unsuccessful, the airline could end up defaulting on the plan the way United Airlines did. In such case, the federal Pension Benefit Guarantee Corp. would take over the pension but only guarantee a portion of what retirees were promised, up to $44,386.32 a year per employee.
