Delta Air Lines has reached an agreement with the Pension Benefit Guaranty Corp. over the termination of the airline’s retirement plan for pilots.
Under the deal, the PBGC will become the plan’s trustee and wind up with an unsecured claim against Delta of $2.2 billion. The proposed reorganization plan will also provide for the distribution to the PBGC of $225 million in senior unsecured notes.
Once the pilots’ plan is terminated, the PBGC will take over the pensions and pay the pilots’ benefits up to a maximum limit, which is generally less than the average pilot would have received if the airline had remained financially sound and did not seek to terminate its plan, the Associated Press noted.
Delta noted that the U.S. Bankruptcy Court previously ruled that the embattled airline couldn’t reorganize or emerge from Chapter 11 unless the pilots’ plan was terminated. The termination of the plan will be retroactive to Sept. 2.
“We are pleased we were able to work with the PBGC and our creditors’ committee constructively to reach this very important and complex agreement,” said Delta CFO Edward Bastian. “It represents another important milestone in Delta’s restructuring.”
As Delta previously announced, its retired pilots will get more than $800 million in lost non-qualified pension benefits. Delta’s active pilots are now covered by a defined-contribution pension plan. The company also reconfirmed that it will preserve the Delta Retirement Plan, which covers ground employees and flight attendants.