Senator Promises Fight Over Repayment Terms

A legislative measure aimed at overhauling the private pension system used by airlines may have hit a snag. Although the House passed the bill last week, some lawmakers are saying the bill faces an uphill battle in the Senate.

Senate Finance Chairman Charles Grassley says some of his fellow senators don’t like the bill, because it would give Delta Air Lines and Northwest Airlines what he calls an unfair advantage over competitors American Airlines and Continental Airlines. 

"There's a tremendous amount of concern from senators that have big hubs for Continental and American, and we're going to have to deal with that," said Grassley, an Iowa Republican, to Bloomberg.

Under the measure, Delta and Northwest would get 17 years to pay under-funded pension obligations, compared with 10 for American and Continental. Also, the bill would allow Delta and Northwest -- both in bankruptcy -- to assume an 8.85 percent annual return on investment in setting the size of their pension liabilities.

As for Texas-based American and Continental, their rate would be tied to bond yields... which currently are about six percent.

A Senate-backed provision would've given all four airlines 20 years to replenish their pension funds, and carriers would’ve picked their own interest rate.

Because of the changes in the House, almost the entire House delegation from Texas opposed the measure. We’ll just have to wait and see what happens when the bill hits the Senate floor.

FMI: www.senate.gov