Delta reaches pension deal

ATLANTA — Delta Air Lines Inc. and the Pension Benefit Guaranty Corp. have reached a settlement over some key issues related to the carrier’s request to terminate its pilots’ pension plan.

Under the agreement, the government’s pension insurer would get an unsecured claim of $2.2 billion against the nation’s third biggest carrier. That would put it in line with other unsecured creditors for compensation after Delta emerges from bankruptcy. But unsecured creditors typically recover only a fraction of what they are owed.

Atlanta-based Delta also said in a bankruptcy court filing Monday that it had agreed to provide in its reorganization plan that the PBGC would get $225 million in senior unsecured notes, which are supposed to be repaid in full after a company emerges from bankruptcy. Delta retains the right to replace the notes with cash.

Delta has already received court approval to terminate the pension plan, but it also needs the PBGC’s nod.

The airline has said it needs to eliminate its pilots pension to successfully emerge from Chapter 11, which it hopes to do by the middle of next year.

Termination of the pension plan would mean the PBGC would take over the pilot pension and pay the pilots’ benefits up to a maximum limit, in many cases less than what they were expecting under the company plan.

A hearing on the agreement between Delta and the PBGC is scheduled for Dec. 20 in U.S. Bankruptcy Court in New York.

Other terms of the agreement:

“When Delta emerges from Chapter 11, the PBGC will be deemed to have waived its rights to restore the pilot plan in full or in part.

“Delta agrees not to establish any new tax-qualified defined benefit plans for its pilots for a period of five years after the exit date.

“Delta will reimburse PBGC for legal fees and expenses up to $7.5 million.