Another Challenge For Pay Deal

The US Pension Benefit Guaranty Corp. -- which insures defined-benefit plans when employers can no longer meet their financial obligations -- objected Thursday to the tentative pay agreement reached between the Air Line Pilots Association (ALPA) and Delta Air Lines last month.

Bloomberg reports the tentative agreement would give pilots $650 million in notes or cash, in exchange for not opposing the cancellation of their pensions.

"The agreement... appears to pose a substantial abuse of the federal pension plan termination insurance program," the agency said in a filing Wednesday. "It dictates the terms of a plan of reorganization, without the protections afforded to creditors in the confirmation process."

That plan, the agency contends, amounts to an "end run" around bankruptcy law provisions that give creditors -- which in this case, includes the Pension Benefit Guaranty Corp. -- time to review third-party pay agreements contained in such deals.

If that argument sounds familiar, it should -- earlier this week, the group representing Delta's retired pilots filed a similar motion with the bankruptcy court. The judge is expected to hear the Delta Pilots' Pension Preservation Organization's argument on May 31 -- the same day Delta's current pilots are expected to wrap up voting on their new contract.

Delta's 6,000 pilots are now voting on the tentative 3 1/2-year agreement, that if approved would cut pilot pay and benefits by about $280 million annually. The new contract would also provide pilots with a $2.1-billion bankruptcy claim.

FMI: www.delta.com, www.pbgc.gov