Published September 05, 2006
WHITE PLAINS – A federal bankruptcy judge on Tuesday approved Delta Air Lines Inc.'s request to terminate its pilots' pension plan.
Judge Adlai Hardin's decision came after a splinter group representing retired pilots formally withdrew its objection to the termination of the plan, which included an option for pilots to retire early at the age of 50 and take out half their entitlements in one lump sum payment.
Delta must still go to the federal government's pension agency, the Pension Benefit Guaranty Corp., to officially end the plan. At that time, the PBGC will take it over.
The carrier told Hardin on Friday it had no choice but to eliminate its pilots' pension plan if it is to come out from bankruptcy and remain afloat.
In a settlement reached on Labor Day, the group agreed to pull its objections to the plan's termination on condition that Delta pay $500,000 to the group, known as DP2, to cover fees and expenses.
The company has estimated that even with the termination of the pilot plan, current Delta pilot retirees will receive on average approximately $75,200 in annualized pension benefits, including the value of the lump sum.
It did not provide an updated estimate of how much pilots who retire in the future will get.
Termination of the pension plan means the end to the ability of Delta pilots who retire in the future to collect half of their pension benefits in a lump sum. That lump sum drove hundreds of pilots to retire, many of them early, before Delta filed for bankruptcy in September 2005. Because of a liquidity shortfall in the pension plan, the lump sum option has not been available since last October.
Delta hopes to emerge from bankruptcy protection by mid-2007.