Fri, May 26, 2006
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
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
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.
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