WASHINGTON — The chief executives of Delta and Northwest airlines Tuesday warned Congress that pension obligations could force their companies into bankruptcy, saddling taxpayers with vast new costs for their retirees unless lawmakers ease the funding rules.
Both men urged Congress to give airlines greater latitude to spread out the payments they are required to make for billions of dollars in unfunded pension liabilities.
"There is no question that the single biggest uncertainty that may well determine whether or not Delta can successfully restructure outside of Bankruptcy Court is the pension cloud that hangs over the company," Delta CEO Gerald Grinstein said in his prepared testimony.
Delta Air Lines Inc. said it had $2.6 billion in unfunded pension obligations. The price tag at Northwest Airlines Corp. is $3.7 billion. Major airlines face $22 billion in unfunded liabilities, according to the Pension Benefit Guaranty Corp., which insures private pension plans.
"The current funding rules are too volatile, unpredictable, inflexible and expensive for our company to survive and compete" in the current environment, maintained Douglas M. Steenland, who runs Northwest.
The airline executives testified at a hearing of the Senate Finance Committee, which is reviewing pension problems after United Airlines' decision to pass $6.6 billion of its pension obligations to the PBGC. United, a unit of UAL Corp., filed for Chapter 11 bankruptcy protection in December 2002.
Experts testified that the pension woes extend far beyond the airlines to a range of industries, most notably auto manufacturing and other old-line sectors of the economy. Overall, companies with underfunded plans reported liabilities that exceeded assets by $353.7 billion last year, a 27% jump from 2002, the PBGC said Tuesday.
Concerns have increased on Capitol Hill that the PBGC, which has $23.3 billion more in liabilities than assets, may need its own bailout in the future.
Tuesday's hearing, however, was focused on the airlines, which are seeking special legislative help. U.S. carriers have lost more than $30 billion since the Sept. 11, 2001, terrorist attacks. Although passenger traffic has rebounded to its pre-9/11 levels, most airlines still are struggling in the face of widespread fare cutting and soaring fuel prices.
