Airlines’ Retirees Pay Price For Bankruptcies

It’s business as usual at Delta and Northwest Airlines despite their dramatic back-to-back bankruptcy filings on Wednesday and most employees and passengers would notice little, if any, difference in either operation. But for retired employees or the soon-to-be retired, it’s a different story. One of the principal benefits of bankruptcy protection is the opportunity to ask a bankruptcy judge to allow the airline to walk away from the company pension plan. United did it earlier this year and some retirees saw their retirement incomes chopped in half or more in the blink of an eye. In fact, according to Air Transport World, the Northwest CEO admitted the airline filed for Chapter 11 protection on Sept. 14 to avoid making a $65 million pension fund payment on Sept. 15. Now the U.S. Pension Benefit Guaranty Corp. (PBGC), which will likely be saddled with the under-funded pensions — it got United’s — is crying foul, saying bankruptcy doesn’t entitle the airlines to simply stop paying.

Delta, Northwest, Expected To Dump Pensions...

It's business as usual at Delta and Northwest Airlines despite their dramatic back-to-back bankruptcy filings on Wednesday and most employees and passengers would notice little, if any, difference in either operation. But for retired employees or the soon-to-be retired, it's a different story. One of the principal benefits of bankruptcy protection is the opportunity to ask a bankruptcy judge to allow the airline to walk away from the company pension plan. United did it earlier this year and some retirees saw their retirement incomes chopped in half or more in the blink of an eye. In fact, according to Air Transport World, the Northwest CEO admitted the airline filed for Chapter 11 protection on Sept. 14 to avoid making a $65 million pension fund payment on Sept. 15. Now the U.S. Pension Benefit Guaranty Corp. (PBGC), which will likely be saddled with the under-funded pensions -- it got United's -- is crying foul, saying bankruptcy doesn't entitle the airlines to simply stop paying. The PBGC's Executive Director, Bradley Belt, said the airlines continue to be legally bound to make the payments. "Nothing in the bankruptcy code requires companies to skip their pension funding payments," Belt said. In United's case, it took a ruling from a judge that continuing to fund the pensions would make it impossible for the company to emerge from bankruptcy.