Delta Gets Court OK to Unload Pension

A U.S. Bankruptcy Court on Tuesday allowed Delta Air Lines Inc. to terminate its pilots’ defined-benefit pension plan, clearing a major hurdle in its restructuring plans.

The airline must now seek the approval of the Pension Benefit Guaranty Corp., the federal pension insurer, to end the plan that covers more than 13,000 active and retired Delta pilots and their beneficiaries.

Delta said no timetable had been set for getting the approval of the pension insurer, but said it wanted to end the plan effective Sept. 2.

Atlanta-based Delta, which has been operating under bankruptcy protection since September 2005, had argued that continuing the plan would jeopardize its ability to emerge from Chapter 11.

The company said that, if allowed to continue, the plan’s costs could exceed $1 billion in the near term and argued that not terminating it would make finding lenders for exit financing difficult.

Judge Adlai Hardin issued his ruling allowing Delta to end the plan after DP2, a group of about 100 retired pilots, withdrew its objection to the termination, Delta said. The airline will pay DP2 about $500,000 for legal fees and other expenses.

The airline’s pilots’ union, representing more than 6,800 current pilots, already had agreed to the move.

The Pension Benefit Guaranty Corp., which would have to administer the plan, also did not oppose Delta’s move in court. Delta still needs to end the plan and hand over its administration to the federal pension insurer.

Delta said it estimated that after the termination of the plan, pilot retirees would receive on average about $75,200 in annualized pension benefits.

The termination would not affect Delta’s other defined-benefit pension plan, covering about 91,000 active and retired flight attendants and ground employees.