New York – Delta Air Lines does not have to pay what could amount to hundreds of millions of dollars for pilot pension benefits, a bankruptcy judge ruled Monday.
U.S. Bankruptcy Judge Prudence Beatty denied a request by a group of retired pilots seeking restoration of pension benefits the airline halted when it filed for Chapter 11 protection last month.
Beatty ruled against DP3, a group that says it represents about 5,800 retired pilots, when she refused to order Delta to resume paying the so-called nonqualified portion of their pensions. That is the part that isn’t covered by federal law that prevents companies from cutting basic pension benefits.
The group also failed to persuade the judge to order Delta to resume contributing to its pilots’ pension plan, including a multimillion-dollar payment that was due Saturday. Delta also is not contributing to the pension plans of other employees, but that was not a subject of Monday’s hearing.
The judge’s decision will save the cash- strapped carrier a considerable amount. Delta said the retirees’ supplemental benefits cost about $6.9 million a month. The airline also said an adverse decision by the judge would have forced it to contribute about $160 million to the pilots’ pension plan this month – and hundreds of millions of dollars more in the future.
The Atlanta-based airline is seeking to restructure its finances under the judge’s supervision.
The judge told DP3 and the Air Line Pilots Association, which supported the group, that their motion was based on a section of the bankruptcy code that can be used only by Delta – not by the group or other parties.
“That’s that. I have ruled,” Beatty said after about two hours of debate.
But she told the pilot groups that they could revisit her decision by, in effect, filing a lawsuit within the bankruptcy court for a separate judgment on the same issue. DP3 based its failed motion on a section of the bankruptcy code that is typically used by companies in Chapter 11 to ask a judge to impose new labor contracts.
Delta, which has asked its pilots union for a 20 percent pay cut and other concessions, could eventually use that section of the bankruptcy code in Beatty’s court to lower its labor costs.
Representatives of DP3 said they are likely to challenge Beatty’s ruling either by filing a separate lawsuit in her court or through an appeal outside her court.
“We will evaluate the merits,” said John Christy, the Atlanta lawyer who argued DP3’s case in Beatty’s courtroom for about an hour. “The issue will not go away.”
Delta’s attorney, Marshall Huebner, said Beatty’s quick ruling and comments during the hearing indicated the group faces tough hurdles trying to get a reversal on Monday’s decision.
“The judge, in our view, ruled pretty clearly against DP3,” he said.
Indeed, even before making her decision, Beatty indicated a number of times that she was leaning toward Delta’s position.
