Delta Air Lines has offered its pilots a $300 million pay package in exchange for the right to terminate its pension plan, according to The Wall Street Journal, citing people familiar with the matter. Under the proposal, the $300 million payment would be in the form of an interest-bearing note.
Officials at the embattled airline noted that the company has not made a decision on whether to terminate its pilot pension plan, which is currently 47 percent underfunded, said the paper. Of course, if the pilots accept the deal, the federal government would be saddled with the unfunded obligations, which will put further strain on the already deficit-laden Pension Benefit Guarantee Corp. (PBGC).
In November, officials at the PBGC — the government’s pension insurer — warned that the total shortfall in insured single-employer plans remained in excess of $450 billion.
Delta spokesman Anthony Black noted that the airline “has not told the pilots that it plans to terminate the pension plans,” adding that “we’re continuing to work hard to save our employee pensions,” reported the Journal.
Delta reduced the amount of concessions it is seeking to $315 million annually, from its previous offer of $325 million. Still, under the latest proposal, the pilots would see their pay cut by 18 percent.
John Culp, an Air Line Pilots Association spokesman, asserted that whatever payment Delta’s pilots might receive for agreeing to terminate the pension plan would be a fraction of what the airline would save by relinquishing its pension obligations, reported the paper. And, given that the pilots are relatively well paid, many would see their pensions cut if the plans were transferred to the PBGC, which caps individual payments at levels far below the average salary of a commercial airline pilot.
Meanwhile, the pilots have reportedly set in motion a plan to strike over the pension issue, among other complaints.