Airline Pension Conflict Stalls Senate Reform Bill

October 4, 2005 (PLANSPONSOR.com) - Senator John Cornyn (R-Texas) said he has placed a "hold" - a procedural blocking action - on the Senate's pension reform bill until disputes over aid for troubled airlines are resolved.

Reuters reports that Cornyn said he took that action after American Airlines and Continental Airlines complained about a provision of the bill that would allow their competitors who are in bankruptcy to postpone payments to their pension plans for many years.   The provision helps the airlines by giving them 14 years to repair pension underfunding, but requires those who want that latitude to freeze their pension plans, stopping the accrual of all benefits.   American Airlines has said it does not want to freeze its pension plans.

The bill provides seven years to make up underfunding for all other companies in all industries.   “They (Continental and American) felt the proposal put them at a competitive disadvantage and actually punished them for doing what we would all hope airlines do, and that is avoid bankruptcy,” Sen. Cornyn told Reuters outside the Senate.

Delta, Northwest, and United Airlines lobbied on Capital Hill for a special provision in the bill, asking for 25 years to make up underfunding (See  Senate Pension Reforms Won’t Give Airlines Enough Time ).   All three are currently operating in bankruptcy.

The bill was expected to move to the Senate floor this week, according to Reuters.   But, Cornyn said that, while progress is being made, he doesn’t expect a compromise before next week when the Senate takes a one week recess.

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