Delta Air Lines (NYSE: DAL) today announced changes to its primary retirement plan that allow Delta to provide competitive retirement benefits that respond to the interests of Delta people while significantly reducing pension costs for the company.
Effective June 30, 2003, Delta will change its retirement plan for non-pilot, U.S. employees from a traditional defined benefit plan to a cash-balance plan. Delta said that the new plan structure is expected to reduce the company’s expenses significantly in 2003 and by approximately $500 million during the next five years as compared to the cost of the current retirement program. These changes are part of Delta’s effort to reduce annual operating costs by $2.5 billion from 2003 through 2005. Delta already has reduced costs by $1 billion in 2002.
A cash balance plan differs from Delta’s current plan in that a cash balance plan states the retirement benefit as an account balance, rather than a monthly payment. The cash balance retirement benefit will be equal to the value of the account and can be taken as a lump sum or an annuity whenever the employee leaves Delta, even if that occurs before retirement.
Employees hired after June 30, 2003, will be eligible for the cash balance benefit only. For current employees who are employed on June 30, 2003, there will be a seven-year transition period to the new plan from June 30, 2003, to June 30, 2010, during which these employees will earn the current plan retirement benefit or the new cash balance benefit, whichever is greater. As a result of this transition, current employees who retire within the next seven years will see no adverse impact on their retirement income benefit.
“As Delta works to recover from the current financial crisis, the company must act to control the high and rapidly growing costs of retirement benefits while protecting the interests of Delta people,” said Bob Colman, Delta executive vice president - Human Resources. “Unless these steps are taken, Delta’s retirement expenses would increase at an unsustainable rate.”
“The new cash balance program is competitive with programs at other leading companies inside and outside our industry. It also is more flexible and more portable than the current plan.”
Delta Air Lines, the world’s second largest carrier in terms of passengers carried and the U.S. airline with the most transatlantic destinations, offers 5,843 flights each day to 426 destinations in 76 countries on Delta, Delta Express, Delta Shuttle, Delta Connection and Delta’s worldwide partners. Delta is a founding member of SkyTeam, a global airline alliance that provides customers with extensive worldwide destinations, flights and services. For more information, please go to delta.com.
Statements in this news release which are not historical facts, including statements regarding Delta’s beliefs, expectations, estimates, intentions or strategies for the future, may be “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. All forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from the plans, intentions, and expectations reflected in or suggested by the forward-looking statements. For a list of factors that could cause these differences, see Delta’s Form 10-Q for the quarter ended Sept. 30, 2002, that the company filed with the SEC on Nov. 14, 2002. Delta has no current intention to update its forward-looking statements.