Will Delta merger hurt pensions?

0 Comments | Deseret News (Salt Lake City), Jul 31, 2008 | by Harry R. Weber Associated Press

ATLANTA -- Officials of unions that represent Northwest Airlines Corp. flight attendants, ramp workers and reservation agents told lawmakers Wednesday they are worried Delta Air Lines Inc.'s plan to combine the two carriers could lead to lost pension benefits for employees.

During a hearing in Washington before a U.S. House of Representatives subcommittee, the officials said they have not received assurances that certain Northwest pension benefits would be protected if Delta's buyout of Northwest is completed.

"If this merger continues and is consummated, they will surely lose benefits going forward," Robert Roach, general vice president of the International Association of Machinists, told the Health, Employment, Labor and Pensions subcommittee, referring to Northwest workers his union represents.

He said he believes Delta management will "fight us very hard," and he argued that the combined airline should not be allowed to "dump their garbage" on the government's pension insurer if Delta were to seek to terminate pension plans.

"I clearly know the value of a defined benefit pension plan," Roach testified during the hearing, which was broadcast on the Internet.

He said he is a former TWA employee whose pension was frozen and later terminated.

After Delta filed for bankruptcy in 2005, it terminated its pilots' defined benefit pension plan. However, it was successful in lobbying for federal legislation to help it preserve its pension plan for other employees. It also agreed to provide compensation for pilots to help offset any lost benefits.

Although Northwest workers took steep pay cuts when Northwest was in bankruptcy, the airline did not turn its pensions over to the Pension Benefit Guaranty Corp., the federal agency that insures private pension plans. Airline workers generally see reduced benefits when their pension is handed to the PBGC, which is what happened to pilots at Delta and UAL Corp.'s United Airlines.

Northwest workers saw their pensions frozen. However, IAM members at Northwest, who include ramp workers and reservation agents, have a new pension to which Northwest contributes.

Rob Kight, vice president for compensation, benefits, and services for Delta, told the subcommittee during the hearing that Delta intends to maintain pension plans of both carriers that were frozen while in bankruptcy.

"We believe that if we take care of our people, they will take care of our customers," Kight said.

He repeated a frequently used Delta catch phrase that the combination of the two carriers is about "addition, not subtraction."

Both carriers have announced in recent months plans on their own to cut thousands of jobs, but Delta has promised there would be no involuntary furloughs of frontline employees as a result of the combination.

"Delta and Northwest have put people first in pursuing this merger," Kight said.

But Patricia Friend, international president of the Association of Flight Attendants-CWA, which represents Northwest flight attendants, said she was skeptical of Delta's motives.

She noted that Delta flight attendants are not currently represented by a union, and she accused Delta management of interfering with an attempt by some of its flight attendants earlier this year to become unionized. The attempt to unionize failed.

"This merger should not be permitted to be a vehicle for union busting," Friend said.

Addressing the subcommittee directly, she said, "I urge you and the members of this committee to remember the hundreds of thousands of airline employees across the country. We are the ones with the most to lose and with the least protection."

Representatives of the pilot unions at Delta and Northwest did not address the hearing on Wednesday. The leaders of the two unions are supportive of the combination, and they are urging their members to ratify a joint collective bargaining agreement reached between the unions and Delta management.

Atlanta-based Delta announced April 14 a stock-swap deal to acquire Eagan, Minn.-based Northwest. The deal is subject to regulatory and shareholder approval. A federal lawsuit filed by a group of passengers seeking to block the deal is scheduled for trial in November in San Francisco.