Very
Interesting 2008 Letter by Mr. Anderson written to Senator Chambliss, which
reveals his mindset and attitude towards the Delta retired pilots plight:
Richard H. Anderson October
31, 2008
Chief Executive Officer
Editorial comments in blue by Mark Sztanyo.
Dear
Senators Chambliss and Isakson:
Thank you
for your letter of October 23, 2008 regarding the pension concerns of Delta's
retired pilots. It is clear from the content of your letter that you have not
been provided a full view of the facts regarding the pension situation with
Delta pilots, so I am happy for the opportunity to do so now. First, however,
let me say, again, on behalf of Delta and the more than 90,000 active and
retired participants in Delta's pension plan covering U.S. ground and flight
attendant employees, thank you! Through Senator Isakson's leadership and
Senator Chambliss' support, Delta achieved its goal of saving that pension plan
from termination. Northwest Airlines was also able to save its plans from
termination through the airline specific provisions of the Pension Protection
Act of 2006 that we all worked so hard together to achieve. However, due to
features inherent to the Delta Pilots Retirement Plan (the "Plan") -
including a provision that allowed retiring pilots to take more than half their
total accrued pension benefit as a cash lump sum when they retired resulting in
many pilots retiring early just to obtain the lump sum - even this legislation
was not sufficient to save the Plan from termination during our bankruptcy. Delta would not have been able
to successfully reorganize and survive but for that termination and this
was a fact recognized fully by the bankruptcy court judge in our case and
agreed to by the Pension Benefit Guaranty Corporation. (Even if the above
point is conceded, that doesn’t mean it was fair or without un just,
disproportionate and excessive harm)
The
proposal you reference in your letter was raised to my attention in the early
summer of this year. Termination of the Plan was the most difficult decision
Delta had to face throughout the bankruptcy and for this reason we gave the
proposal full consideration and exploration. Once that review was complete in
mid-July, we communicated our findings to the leadership of the organization
that submitted the proposal and made that letter available to all retired
pilots. I have enclosed a copy of that response which details the numerous
reasons the proposal submitted cannot work. It is true the issue was again
raised at our September 25 shareholders meeting and I stated at the meeting
that we consider the issue closed. While
I understand and am sympathetic to the frustration expressed by our retired
pilots, the proposal submitted is not workable and therefore further consideration of it would be
fruitless. (Our request isn’t for taking over the plan but rather,
assessing the shortfall in the NQ payout and addressing it in a meaningful way
to help alleviate thousands of loyal retired pilots financial hardships.
Again, the
attached letter provides detailed reasons why the proposal submitted is not
workable, but I would like to draw your attention to a few specifics. Your
letter states you understand that ''the majority of retired Delta pilots
receive only a small percentage of the monthly retirement benefit they earned
while employees of Delta." Nothing could be further from the truth. The
Plan worked in a way that allowed each retiring pilot to take as a lump sum
cash payment on retirement an amount equal to one half of their total
retirement benefit. To really understand the impact of this feature, it helps
to know that most pilots who retired in the years leading up to Delta's
bankruptcy earned enough money that their total pension benefit exceeded the
amount that could legally be paid from a tax-qualified pension plan. For this
reason, the total pension benefit for a retiring Delta pilot most often
consisted of what are known as both qualified benefits (i.e. payable from a
tax-qualified pension plan) and non-qualified benefits (Le. generally payable
from company assets). The way the Plan worked, the cash lump sum reference
above was required to be paid almost exclusively from the tax-qualified pension
plan assets and it often exceeded $1 million dollars. When our retired pilots
say that they "receive only a small percentage" of their retirement benefit,
I can only assume they are ignoring the money already paid to them at the time
they retired through this lump sum feature. Again, the availability of the lump
sum in the Plan drove a very high number of Delta pilot early retirements. One
of the consequences of this was that, in the twelve months leading up to our
bankruptcy, more than one thousand of our pilots made the decision to retire
early in order to secure for themselves the immediate payment of these lump
sums representing more than half of their total accrued pension benefit. These
retirements drained over $900 million dollars out of the Plan in the 12 months
prior to our bankruptcy. This was on top of the large number of pilots who had
retired and taken their lump sums in the twelve months prior to that. (By focusing on the lump, Mr. Anderson is zeroed in on
50% of our owed retirement. He is
absolutely and completely ignoring the other 50%of earned retirement that has
become pennies on the dollar. And this
loss of our annuity is what has caused real tangible and documentable harm)
These lump
sums only represented one half the total pension benefit for our retiring
pilots. What they are, of course, concerned with now is what happened to the
other half, so let me explain a few details about that. As I mentioned before,
pilot pension benefits were generally large enough such that they could not all
be paid from a tax-qualified pension plan. Under our pilot working agreement, lump
sum payments on retirement were always taken first from the assets of the
tax-qualified Plan. For this reason, in general, a significant portion of the
remaining half of the pension benefit payable to retired pilots was in the form
of non-qualified pension benefits payable from company assets. First, in
addition to the 50% each lump sum described above, retiring pilots also
received an additional cash settlement of a portion of their non-qualified
benefit at retirement. This settlement of what was known as the Money Purchase
Pension Plan portion of the Plan meant that retiring pilots, in fact, received
more than half their total benefit in cash at the time they retired.
Second,
during our bankruptcy, all non-qualified pension benefits, including those
payable to executives, were terminated. Each affected individual received a
claim in Delta's bankruptcy for the value of any such lost non-qualified
benefits generally payable in the form of stock in the re-organized Delta. As is the case with virtually any bankruptcy,
the claims in Delta's bankruptcy were not worth 100 cents on the dollar when
paid and their ultimate value is tied directly to Delta's stock price. At the
time the claims were paid to retired pilots, Delta's stock was trading just
below $20 per share and it has exceeded that amount in the intervening period,
though it is not in that range now. A small additional distribution on this
claim will likely be provided to retired pilots and other claim holders at some
point in the future when all of the claims in Delta's case are finally
resolved. While this represents a loss for our retired pilots for the
nonqualified portion of their pension benefit, it is a loss experienced by
every other Delta stakeholder who had a claim in Delta's bankruptcy case. It is
worth noting that recovery on claims in the Delta case was substantially higher
than in either the United Airlines or US Airways cases.
(The
above is a smoke and mirrors explanation of why our other “earned”
non-qualified benefits should be satisfied ignores the substantial losses of
real dollars promised and planned for).
This brings
us to the final portion of the pension benefit our retired pilots are concerned
with the remaining (if any) tax-qualified plan benefit payable to them from the
Plan. Again, this portion represents the minority (often small minority) of a
retired pilots pension benefit. As a result of the termination of the Plan, the
Pension Benefit Guaranty Corporation (the "PBGC") is now responsible
for this portion of the benefit. Your Ietter states you understand that "a
number of retired pilots receive zero benefit from the PBGC, and many more get
a monthly PBGC payment that equals half or less than half of their Social
Security benefit check." While the rules that the PBGC applies to
determining benefit amounts to participants in plans it administers are arcane
at best I can tell you that in general, it is our retired pilots who received
the largest lump sum payments who currently receive the least amount, including
zero from the PBGC. This makes sense when you consider what I've explained above.
Those who had large lump sums paid out at the time of retirement often had very
little, if any tax-qualified benefit left to payout from the Plan. The PBGC
takes this into account when calculating its benefit payments.
To summarize, Delta's retired pilots, in general,
already received more than half their total pension benefit in cash, lump sum
payments at the time they retired; they received a claim for their sizeable
non-qualified benefit and what is left over, if any, is paid to them by the
PBGC under its rules. But the end of the PBGC portion of this story has not yet
been written. In addition to paying claims directly to retired pilots for
non-qualified benefits, Delta paid substantial claims and other consideration
to the PBGC upon termination of the Plan.
While not yet completed, the PBGC is in the process of valuing that
consideration and when it does so, many if not most of the retired Delta pilots
will get an increase in the benefit payable by the PBGC and that increase will
be retroactive to the September 2006 date of Plan termination. One way your
influence could certainly be helpful to retired Delta pilots would be to urge
them to complete this process as expeditiously as possible.
Finally,
your letter states that you are told that "Delta will be assuming the
pension liabilities for over 30,000 Northwest employees and retirees.” That is true and we will use the airline specific provisions of
the Pension Protection Act of 2006 to ensure that we meet all those
obligations. Each company
had these obligations in its stand-alone business plans and the strength
that we gain by merging together simply improves our ability to meet those
obligations. (The
Delta Pilot Pension Plan was ALSO in the stand alone business plan until
targeted as a way to improve the bottom line)
We do not
dispute that retired Delta pilots suffered pension losses during the bankruptcy
and we remain sympathetic to that loss (disproportionate
losses and far in excess of any other group) and understanding of that
frustration. However, I hope that what I've explained above gives you each a
better perspective on the entire situation.
Having seen
Captain Moak's separate response to you, let me also say that Delta very much
supports S.1270/H.R.21 03 and S.2505/H.R.4061. We wholeheartedly agree that
your sponsorship and support of these measures would be an excellent way to
support the active and retired pilots of Delta Air Lines.
Cordially,
/Richard/
Enclosure
cc: Captain
Lee Moak
Phase
I - Complete:
I cannot thank you all enough for your wise and valuable
help. I'm not just blowing smoke, here. This just wouldn't have been nearly as
refined without your help, so please take some pride in that and in how
compelling our effort has become. One day maybe we can all raise a glass
together. Thanks again, Mark
The Petition
has been compiled and delivered to our targets but it will remain open for anyone to read, see and sign. Feel free to point or visit the site:
Three quick comments:
1. There WAS an unfair injustice! Some have asked for some proof of
the harm that DAL Retired Pilots incurred so click here to see it
first hand: http://the3500.homestead.com/Proof_of_Harm.pdf
2. Will this work? Capt Moser is using the petition as the first step
in a multi faceted strategy to gain a meeting to discuss these
issues. Admittedly it is a long shot. Since the cause is just and
doing right is always good, why not give him our support?
3. Is my info safe? Absolutely!
Note: Use different computers for other family members.
RE: Petition supporting Delta Retired Pilots and a remedy for lost
benefits.
SIGN THIS PETITION TODAY!
http://www.thepetitionsite.com/627/208/216/
ALL Petition ISSUES or QUESTIONS Click here: http://pcn.homestead.com/PetitionFAQs.html
SHARE THIS NOTICE WITH OTHERS!
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