PBGC's Petition Rejected, Though May Appeal
ANN REALTIME UPDATE 05.31.06 1920
EDT: After hearing a petition from the US Pension Benefit Guaranty
Corp asking the court to toss out a new pilot contract approved
early Wednesday morning between Delta Air Lines and its pilots, US
bankruptcy court judge Adlai Hardin gave his blessing to the deal
-- clearing the way for Delta to save $280 million annually over
the next three years in pilot pay and benefits, while also likely
ending the looming threat of a pilots strike.
"This agreement provides a framework for Delta to successfully
reorganize and emerge from bankruptcy ready to win in today's
competitive marketplace," said union leader Lee Moak. "The new
contract also provides real returns and job security for the
unprecedented recent sacrifices made by the Delta pilots in support
of our great company. We look forward to Delta's successful
emergence from bankruptcy and together with all Delta employees,
returning our airline to success."
Before issuing his ruling Wednesday afternoon, Hardin heard the
PBGC's case that the loan guaranty company should be able to
collect a $650 million note and $2.1 billion unsecured claim should
the pilots' pension be terminated -- which is likely. Delta has
promised those funds to the pilots as part of the contract
agreement.
After hearing the PBGC's case, however, Hardin ruled that
ratifying the new contract was in the best interests of all those
involved in the long fight between Delta and its pilots -- and will
finally give the beleagured carrier the opportunity to go
forward.
It was unclear Wednesday night whether lawyers for the PBGC
would appeal Judge Hardin's ruling.
ORIGINAL REPORT
Pilots for Delta Air
Lines have approved a new pay agreement with the bankrupt carrier
that will cut their pay and benefits by $280 million a year through
2009... but also lets them stay on the job, and stay flying.
The Air Line Pilots Association said Wednesday that 61 percent
of the union's rank-and-file pilots voted in favor of the deal. The
Associated Press reports the new contract is set to go into effect
Thursday, pending approval by a federal bankruptcy court judge.
That approval isn't guaranteed, however. The judge is scheduled
to rule on the contract late Wednesday in a White Plains, NY
courtroom... after hearing arguments from the Pension Benefit
Guaranty Corporation (PBGC) on its motion for the courts to reject
the contract. The PBGC says the group should be the receipient of a
$650 million note and $2.1 billion unsecured claim should the
pilots' pension be terminated, as is widely expected. Delta has
promised those funds to the pilots.
The PBGC made a similar objection in the bankruptcy case of
United Airlines, but later settled the issue when parent company
UAL promised to pay the agency up to $1.5 billion in notes and
stock in the reorganized airline.
Should the judge rule
against the new contract at Delta, however, it would open a
Pandora's Box of potential trouble for the airline. Rejection of
the deal would send the pilots union and the airline back to the
negotiating table -- again -- after months and months of
contentious arguments.
Of even greater concern is the likelihood Delta would ask the
bankruptcy court for permission to toss out the old pilots
contract, and institute its own sweeping cuts.
Pilots have promised to strike if that happens... and that would
almost certainly mean the end of Delta.