Airlines Lobby for Pension Relief
By EVAN PEREZ
Staff Reporter of THE WALL STREET JOURNAL
High fuel prices and the prospect of a pension overhaul backed by the Bush administration are escalating a push by several financially troubled airlines to win some relief from massive pension payments.
Delta Air Lines executives, employees and retirees yesterday sought support from lawmakers for legislation that would let airlines stretch out pension payments over as many as 25 years. Northwest Airlines and AMR Corp.'s American Airlines are lobbying for similar changes, which could help the airlines avoid a taxpayer-funded bailout if their financial condition continues to deteriorate. The Air Line Pilots Association, the largest U.S. pilots union, is backing the airlines in their pension-payment relief efforts.
The lobbying push also aims to undermine a Bush administration proposal that would force airlines and other companies with poor credit ratings to pay more into government insurer Pension Benefit Guaranty Corp. The administration's proposal is expected to be considered by the Senate Health, Education, Labor and Pensions committee soon. "The President's proposal is a death sentence for the airlines' pension plans," said Andrea Fischer Newman, Northwest's vice president of government affairs.
Gerald Grinstein, chief executive of Delta, of Atlanta, recently won the support of Sen. Johnny Isakson (R., Ga.), a member of the Senate committee. Sen. Isakson said he plans to introduce legislation that would give airlines a chance to catch up on their pension payments. Future pension payments are "a bigger problem right now than even the cost of fuel," he said. Still, the measure may face considerable opposition, given the worries over the health of Pension Benefit Guaranty.
The fix being sought by the three airlines is a contrast to recent moves by United Airlines parent UAL Corp. and US Airways Group Inc., both in bankruptcy-court protection, to shift their pension obligations to the pension agency. The U.S. airline industry has a total of about $21 billion in underfunded pension obligations, but some members of Congress have expressed little interest in any relief that would apply only to airlines. Airlines also won a two-year reduction last year in their required pension payments, and some lawmakers are reluctant to offer more help so soon.
"We're not asking for one penny from the government," said Cathy Cone, a retired Delta flight attendant who represents a committee of the carrier's nonunion retirees. "All we're asking for is more time."
It isn't clear whether pension relief would come in time to rescue increasingly shaky airlines. Delta, which is obligated to make $450 million in pension payments this year, warned last week that it faces a renewed threat of bankruptcy because of high fuel prices and won't be able to generate enough cash from its operations to meet all its liquidity needs in 2005.
Write to Evan Perez at evan.perez@wsj.com