| Delta Chief To Push Congress For Permanent Pension Relief |
Aviation Daily 12/16/2004 |
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| Delta CEO Jerry Grinstein's plans for 2005 cover a wide range of priorities, including a renewed lobbying effort in Washington to push for permanent reform of pension rules and several projects to regain the trust of the flying public. |
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| Grinstein yesterday made a rare public address yesterday at the Wings Club in New York and touched on a wide range of topics. Since taking the helm of Delta in January, he has shied away from the politics of Washington, as his top priority was to avoid a Chapter 11 bankruptcy filing for Delta. With that concern sidelined, Grinstein next year will push the new Congress to adopt a permanent plan to stretch out Delta's payments. |
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| "We have already started discussions with the Pension Benefit Guaranty Corp. and Congress," he said. His wants a bill that can address Delta's needs, as well as those of the taxpayers. "If all the network airlines turn their pension obligations over to the PBGC, that cost burden is absolutely enormous." Delta, along with some of its legacy peers, plans to ask Congress to deal with airline's pension problems separately from other industries. "We would ask them to specifically address the needs of network carriers." |
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| More to the point, Delta and the other airlines will ask Congress for a permanent change to the pension rules after getting temporary relief recently that allows them to stretch out their payments over two years. The airlines want "comprehensive reform" that lets them stretch out their obligations to their respective defined pension benefit plans even further. Under the new deal with pilots, Delta froze the defined plan and is moving to a defined contribution plan. |
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| Even though Delta froze the previous benefit plan, it still has significant obligations. Rather than terminate the plans, the carrier wants room to stretch out the payments to fully fund what employees are expecting. |
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| The PBGC, for its part, worries that the cost burden may land in its court if large U.S. airlines like United, Delta and American all terminate their plans within a short period of time. In a recent session before senators, PBGC Executive Director Bradley Belt partly blamed outdated pension rules for creating the situation and urged Congress to define more precisely such terms as "current liability." Lawmakers, in turn, suggested rules to prevent airlines from cutting pension funds while investing billions in other projects (DAILY, Oct. 14). |
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| While Grinstein still has his hands full with internal challenges and Washington lobbying, he also wants to win back passengers that the airline has alienated recently. He reported that the "SimpliFares" plan that underwent testing in Cincinnati in recent months has boosted traffic in that market by about 30%. "What was forecast to happen has occurred," he said. "It has been well received and puts us on the road to developing trust." |
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| Grinstein is frustrated that many consumers book directly with Southwest or JetBlue without checking Delta fares because they assume that the low-cost carriers always offer the lower price. "In many cases, their fares are higher," Grinstein said. While he wouldn't say if or when the SimpliFares would move to other markets, Grinstein was clearly pleased with the results in Cincinnati. |
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| Internally, the airline has adopted a new measuring stick for its initiatives. Whenever it evaluates a new project, management asks how it measures up to five attributes -- comfortable, affordable, simple, stylish and inviting or "CASSI." Grinstein wants to align Delta's objectives using those categories to win back passengers. "We have lost that element of trust with our passengers," he said. "We have to regain that trust." |
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| As part of that plan, Grinstein yesterday took the first step to reverse some of the complicated changes his predecessors made to the airline's frequent flyer program. When he evaluated the program, he said, "I need lawyers to figure it out" and "passengers were getting angry." As a result, on Jan. 1 the airline will make some changes to simplify the program, including reducing the requirement for the "platinum" level from 100,000 miles to 75,000 miles. The carrier also is cutting its fee to change tickets from $100 to $50, an amount that is more competitive with rival AirTran. |
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| Overall, Grinstein predicted that the change occurring in the industry will accelerate over the next two years, and he also forecast some consolidation among low-cost carriers. Twenty-six years after deregulation, "we have reached a tipping point," Grinstein said. "We will see more rapid change than ever before" in the coming years. -SL |
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