ATLANTA, Sept. 5, 2006 – Delta Air Lines (Other OTC: DALRQ) today announced that the Judge overseeing its Chapter 11 restructuring granted its motion seeking bankruptcy court approval to terminate its pilot defined benefit pension plan.
Because the Pension Benefit Guaranty Corp. (PBGC), the federal agency charged with insuring the nation’s pension plans, has the responsibility for plan termination under ERISA, Delta now must secure the pension agency’s approval before the pilot plan can be terminated. While a timetable to attempt to secure PBGC approval has not yet been established, Delta plans to establish September 2, 2006, as the effective date of termination of the pilot plan.
Judge Adlai Hardin issued his ruling today following the carrier’s advising the bankruptcy court that over the weekend the last remaining group opposing termination of the pilot plan withdrew its objection.
The group, consisting of about 100 Delta retired pilots known as DP2, which until now had been objecting to the termination, joined the PBGC, Delta’s Unsecured Creditor’s Committee, the Air Line Pilots Association (ALPA), and another group of approximately 2,850 retired Delta pilots known as DP3, Inc., in not opposing the termination of the pilot plan.
“The Court’s order, together with the broad-based consensus not to oppose the termination of the pilot pension plan, is significant and validates the company’s need to take this course of action in order to survive. It is a move Delta does not take lightly. It is an unfortunate but necessary step in Delta’s restructuring, and we regret the impact of termination on active and retired pilots,” said Edward H. Bastian, Delta’s executive vice president, chief financial officer and head of the company’s in-court restructuring efforts.
In connection with the DP2 group’s decision to withdraw its objection, Delta will pay DP2 approximately $500,000 on account of the pilot retiree group’s legal fees and other expenses.
Delta has said that while the Pension Protection Act of 2006, signed into law August 17, would give the company the opportunity to preserve the defined benefit pension plan for its approximately 91,000 active and retired flight attendant and ground employees, the legislation’s airline provisions did not provide the same opportunity for its pilot plan because of the plan’s key features and unsupportable costs.
Under the terms of Delta’s pilot defined benefit pension plan, pilots may retire at age 50 and take out half of their total retirement benefit in a lump sum payment and receive the rest as an annuity.
“Unfortunately, the Airline Relief Act provisions provide no relief from the unaffordable costs resulting from the pilot plan’s lump sum feature – expected to exceed more than $1 billion in the near term alone – that would confront Delta upon emergence from bankruptcy and beyond were the pilot plan not terminated,” said Bastian.
The company has estimated that even with the termination of the pilot plan, current Delta pilot retirees will receive on average approximately $75,200 in annualized pension benefits, including the value of the lump sum.
Delta said it is on track to realize more than two-thirds of its business plan’s approximately $3 billion in annual financial improvements by the end of this year, and “barring any unforeseen disruptions,” plans to emerge from bankruptcy by mid-2007.
Delta Air Lines (Other OTC: DALRQ) offers customers service to more destinations than any global airline with Delta and Delta Connection carrier service to 292 destinations in 46 countries. With more than 50 new international routes added in the last year, Delta is America’s fastest growing international airline and is the world’s leading carrier between the United States and destinations across Europe, India and Israel with flights to 29 trans-Atlantic destinations. To Latin America and the Caribbean, Delta offers nearly 400 weekly flights to 48 destinations. Delta's marketing alliances also allow customers to earn and redeem SkyMiles on more than 14,000 flights offered by SkyTeam and other partners. Delta is a founding member of SkyTeam, a global airline alliance that provides customers with extensive worldwide destinations, flights and services. Including its SkyTeam and worldwide codeshare partners, Delta offers flights to 461 worldwide destinations in 96 countries. Customers can check in for flights, print boarding passes and check flight status at delta.com.
Statements in this news release that are not historical facts, including statements regarding our estimates, expectations, beliefs, intentions, projections or strategies for the future, may be “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. All forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from the estimates, expectations, beliefs, intentions, projections and strategies reflected in or suggested by the forward-looking statements. These risks and uncertainties include, but are not limited to, the actions and decisions of our creditors and other third parties with interests in our Chapter 11 proceedings; our ability to obtain court approval with respect to motions in the Chapter 11 proceedings prosecuted from time to time; our ability to develop, prosecute, confirm and consummate one or more plans of reorganization with respect to the Chapter 11 proceedings and to consummate all of the transactions contemplated by one or more such plans of reorganization or upon which consummation of such plans may be conditioned; risks associated with third parties seeking and obtaining court approval to terminate or shorten the exclusivity period for us to propose and confirm one or more plans of reorganization, to appoint a Chapter 11 trustee or to convert the cases to Chapter 7 cases; our ability to obtain and maintain normal terms with vendors and service providers; our ability to maintain contracts that are critical to our operations; our ability to maintain adequate liquidity to fund and execute our business plan during the Chapter 11 proceedings and in the context of a plan of reorganization and thereafter; our ability to comply with financial covenants in our financing agreements; labor issues, including possible strikes or job actions by unionized employees; our ability to implement our business plan successfully; the cost of aircraft fuel; our ability to terminate our defined benefit pension plan for pilots; funding obligations with respect to our defined benefit pension plan for nonpilots; interruptions or disruptions in service at one of our hub airports; our increasing dependence on technology in our operations; our ability to retain management and key employees; restructurings by competitors; accidents involving our aircraft; the effects of terrorist attacks; and competitive conditions in the airline industry.
Additional information concerning risks and uncertainties that could cause differences between actual results and forward-looking statements is contained in Delta’s Securities and Exchange Commission filings, including its Form 10-K, filed on March 27, 2006 and its Form 10-Q, filed on August 9, 2006.
The risks and uncertainties and the terms of any reorganization plan ultimately confirmed can affect the value of our various pre-petition liabilities, common stock and/or other securities. No assurance can be given as to what values, if any, will be ascribed in the bankruptcy proceedings to each of these liabilities or securities.
We believe that our currently outstanding common stock will have no value and will be canceled under any plan of reorganization we propose, and that the value of our various pre-petition liabilities and other securities is highly speculative. Accordingly, we urge that caution be exercised with respect to existing and future investments in any of these liabilities and/or securities. Investors and other interested parties can obtain information about Delta’s Chapter 11 filing on the Internet at delta.com/restructure. Court filings and claims information are available at deltadocket.com. Caution should be taken not to place undue reliance on Delta’s forward-looking statements, which represent Delta’s views only as of August 9, 2006, and which Delta has no current intention to update.