Delta Wins OK to Pay Pilot Claims, End Pension

Delta Air Lines Inc., the largest U.S. carrier in bankruptcy protection, won court approval Tuesday to give retired pilots at least $77 million in claims in return for terminating their pension plan.

U.S. Bankruptcy Judge Adlai Hardin authorized Delta to pay about 3,600 retired pilots $9 million in cash for benefits accrued under one of the airline’s pension plans. The pilots will receive an unsecured claim for the rest, valued at about $68 million.

“Delta faced a choice: We could either keep fighting through various courts and pay $9 million to the lawyers, or pay $9 million to the retirees who are really suffering,” Marshall Huebner, Delta’s lawyer, said at a hearing in White Plains, N.Y. “We’d rather give it to Delta people who were injured economically.”

DP3, a nonprofit corporation that represents about 2,800 retired Delta pilots, agreed to the proposal in June. Atlanta-based Delta is seeking court approval to end pilot pension programs while it develops a plan to repay creditors and exit bankruptcy protection.

The retired pilots last week asked Hardin to delay a Sept. 1 hearing on Delta’s termination request so they could try to determine whether a new federal law would let the airline maintain the pension plans.

“We reached this settlement after serious negotiations,” Dean Booth, a lawyer representing DP3, said. “This was sound judgment on the part of our clients.”

Hardin, who had previously approved the agreement, revisited the matter Tuesday after some pilots said the proposal was unfair. Delta agreed to remove them from the settlement. The airline expects to terminate the plan Sept. 2 after winning court approval, Huebner said.

“I am not in position to reject a stipulation as to which only a relative tiny handful have objected,” Hardin said.

Delta has about 5,600 retired pilots, according to court documents.

Delta, the third-largest U.S. airline, said Aug. 4 that it might have to liquidate unless the plan was terminated. The carrier said the plan didn’t have enough money to satisfy a lump-sum provision allowing retired pilots to receive half their benefits upfront.

Delta has been operating under bankruptcy protection since Sept. 14.