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Airlines seek pension help

Delta and Northwest say they want to fulfill their obligations

Delta Air Lines Inc. and Northwest Airlines Corp., after filing bankruptcy Wednesday, said they still back legislation that would let them meet their pension obligations rather than terminate the retirement plans.

The two airlines have been lobbying Congress since April for legislation that would exempt them from large pension payments due in the next few years and instead give them as long as 25 years to pay obligations to employees. That bill hasn't been passed by Congress.

In bankruptcy court, the carriers have another option, which is to seek termination of the plans and have a government agency pay a portion of the promised benefits to the carriers' employees.

Delta, the third-largest carrier, said in a prepared statement "there can be no guarantees" about the future of its pension plans, even though it is still pursuing the legislation. Northwest, the fourth-largest U.S. carrier, said in a statement it "will continue to seek favorable pension legislation."

The airlines are looking for ways to delay costs that have grown because of declines in the value of pension investments and falling interest rates on their interest-bearing accounts. Airline pensions had a negative balance of $21.1 billion last year, compared with a positive balance of $3 billion in 2000, according to an April study by Charles River Associates Inc. of Boston.

Rep. Tom Price, R-Georgia said he believes Delta's first choice still is to meet its obligations rather than terminate the plans, as UAL Corp.'s United Airlines and US Airways Group Inc. won bankruptcy court approval to do.

"The legislation ought to move forward," Price said in an interview.

Sen. Johnny Isakson, R-Georgia, said in a statement he will continue to press for the legislation "so that the interests of the airline employees and the interests of the American taxpayers are protected."

The Pension Benefit Guaranty Corp., an agency set up by the government to insure employees' fixed-benefit pension plans, would be responsible for paying Delta and Northwest employees a portion of their pension checks should the carriers' terminate the plans in bankruptcy court.

Delta and Northwest will end up terminating the plans in bankruptcy court, in part because it is easier to shed those liabilities than almost any other obligation, said Douglas Elliott, head of the Washington-based Center on Federal Financial Institutions, a non-partisan group that tracks pension issues.

Northwest "insists that it will make every effort to avoid" terminating plans, he said in an e-mail. "I fear that this will prove impossible, but we can all hope."

Delta said in May that it faces $3.6 billion in pension contributions through 2008, including $1.6 billion in 2008. Northwest said Wednesday it is required to contribute $3.3 billion to its defined benefit plans from 2006 through 2008.

Congress in April 2004 passed legislation that lets carriers and steel companies defer so-called catch-up payments required when pension plans become underfunded by a certain amount. That law expires at the end of this year.

The U.S. Senate Finance Committee in July approved pension legislation that gives the carriers 14 years to pay obligations rather than the 25 years Northwest and Delta had been seeking. That legislation is still under consideration in the Senate, and the House is still in the process of drafting its version of the pension bill.