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.”
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