Judge Gives Nod to Delta's Settlement with Pilots Union

June 1, 2006 (PLANSPONSOR.com) - A federal bankruptcy court judge rejected objections by the Pension Benefit Guaranty Corporation (PBGC) when he gave his blessing to a wage concession agreement between Delta Air Lines and its pilots.

According to Aero-News.net, Delta had promised to give the pilots $650 million in notes and a $2.1 billion unsecured claim if the pilots’ pension plan was terminated. The PBGC said that it should get the money, under the Employee Retirement Income Security Act (ERISA).

The nation’s private sector pension insurer rejected the airline’s settlement with the pilots’ union, claiming that Delta’s proposal to compensate pilots for unfunded benefits in their retirement plan violated ERISA (See PBGC Says Delta’s Settlement with Pilot’s Union Defies ERISA).

The industry news Web site reported that Judge Adlai Hardin found for the airline, clearing the way for Delta to save $280 million each year over the next three years in pilot pay and benefits – a concession agreed to in April between Delta and the Air Line Pilots Association (ALPA) – which represents Delta’s 5,930 active pilots (See Delta Deal Considers Likelihood of Pension Termination).

Hardin only ruled on the PBGC’s objection, not the concession deal between the pilots and the airline.

The judge also tried to quell concerns of some pilots that are against the settlement, saying that ratifying the new contract would be in the best interest of all parties. According to Aero-News.net, 61% of the union’s rank-and-file pilots voted in favor of the deal.