Delta CEO Gerald Grinstein Calls for Practical, Affordable Approach to Airline Pension Funding Crisis

WASHINGTON, June 7 /PRNewswire-FirstCall/ -- Delta Air Lines' CEO Gerald Grinstein joined airline industry colleagues and others to provide testimony to the U.S. Senate Committee on Finance at a special hearing on the topic: "Preventing the Next Pension Collapse: Lessons from the United Airlines Case." In his testimony, Grinstein called for a practical and affordable approach to solving the airline pension funding crisis. He also urged the Senate to pass S. 861, the "Employee Pension Preservation Act of 2005," introduced by Senators Johnny Isakson (R-GA) and Jay Rockefeller (D- WVA).

"The pension situation has grown even more urgent since US Airways and United Airlines shed almost $15 billion in pension obligations," Grinstein said. "These moves place additional competitive pressure on Delta and other airlines facing large, immediate funding contributions at a time when we can least afford them."

Under current legislation, funding requirements for employee pension benefits must be met within an unreasonably short time period, making them so unaffordable that they threaten the viability of the airlines that offer them, said Grinstein. When this happens, airlines have the option to hand over the funding of their pension obligations to the Pension Benefit Guarantee Corporation (PBGC).

"As a result, airlines are at a crossroads. Without changes to the current rule, airlines will almost certainly be forced into bankruptcy and have to transfer additional pension liabilities to the PBGC," said Grinstein. "Alternatively, if Congress chooses to move swiftly to pass legislation that provides a manageable, affordable pension funding schedule, airlines will have a far greater chance to stay out of court and continue the business transformation the new marketplace requires."

Grinstein explained that the proposed legislation, S. 861, would allow airlines to extend their required pension payments and make them on a more manageable schedule, using more stable, long-term assumptions. In return, any airline that chooses this option would agree to limit its pension liabilities by freezing pension benefits, or by funding pension liabilities in the year that they occur. Airlines could choose to offer more manageable pension plans, such as a 401(k), but it would be a "pay as you go" solution.

Let me state clearly that "Delta is seeking a solution, not a subsidy," said Grinstein. "We are pursuing a course that significantly limits additional PBGC liabilities and allows us to continue funding the benefits our employees and retirees have earned."

Delta believes that S. 861 offers a workable solution for pension reform, balancing the interests of all parties:

- Employees and retirees would have a greater chance of receiving the full pension benefits they have earned rather than see those benefits reduced, perhaps significantly, in a transfer of liabilities to the PBGC; - By making it less likely that airlines will transfer additional unfunded liabilities, S. 861 decreases the risk of a taxpayer-funded bailout of the PBGC; - S. 861 would benefit the traveling public by providing a solution that supports the stability in the nation's air transportation system as the airline industry undergoes massive change; and - S. 861 would benefit Delta and other airlines by removing the most enormous barrier to the ability to access capital markets, a key component in completing a transformation process outside of bankruptcy.

"The decisions made now about the pension funding crisis will be far reaching and profound," said Grinstein. "They will affect the future of airline employees and retirees, the PBGC, the traveling public, and the major network airlines that -- despite financial challenges -- continue to serve as the backbone of our nation's air transportation system."

Delta Air Lines is the world's second-largest airline in terms of passengers carried and the leading U.S. carrier across the Atlantic, offering daily flights to 488 destinations in 87 countries on Delta, Song, Delta Shuttle, the Delta Connection carriers and its worldwide partners. Delta's marketing alliances allow customers to earn and redeem frequent flier miles on more than 14,000 flights offered by SkyTeam and other partners. Delta is a founding member of SkyTeam, a global airline alliance that provides customers with extensive worldwide destinations, flights and services. Customers can check in for flights, print boarding passes and check flight status at delta.com.