Petition - HL 190 (1)

IMPORTANT:  While company talks are in progress, PLEASE NO EMAILS TO LEADERS OR CONTACT WITH THE PRESS until we get final company decisions. 

 

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Here is a report of our meeting with Mr Kight at Delta headquarters on Nov 12^th as a follow on to our petition to ask for a better solution for the financial harm that has affected the Delta retired pilots since bankruptcy. 

 

The Good:

1. He gave us an hour.
2. We learned from the secretary that Mr Kight was anxious to meet with us, indicating to me at least that our petition to the board and other executives probably put this on his agenda and he was anxious to clear it.  So that also means that others in the company knew we were interested in meeting.  Along this line, Mr Kight KNEW that we had approached Mr Anderson and stated he would not be present at this meeting.
3. Meeting was cordial, civil, and he was surprised and pleased with our approach and even our request of an Executive Comm.  In retrospect,  I believe we all feel on the macro we completely accomplished what we set out to do;

a. indicate the real nature of our harm,

 b. personalize it,

c. zero in on how the NQ affected our monthly income,

d. and make a simple request to ask for an Executive committee to verify our claims and recommend better traditional Delta solutions.   

4. He left a small crack open at meeting end.  He did not close the door completely but said he would talk with another and get back with us.
5. I think we will respond to him in first "keeping the issue alive."

 

Note: by the way the second goal going in to this meeting was to move the issue up the chain of command. 

 

The Bad:

1. It is not clear we made our points in any way that moved the needle.
2. Kight stayed with answers consistent with his letter in response to the petition.  I have attached that letter to this email.  In red, comments included are the majority of the responsive points that we attempted to make.  
3. It is unclear if we have any way forward.   

As you look at the attached letter you will see most of the points that Kight made after our 30 minute presentation was done. 

 

Comments = in red

 

June 12, 2013

Dear Captain Moser:

 

I am responding for Delta both to the letter and accompanying petition that you sent to several Delta officers and members of Delta’s Board of Directors some weeks ago as well as to the phone call that you recently made to Mr. Anderson’s office. The materials you sent have been thoroughly reviewed internally, and let me first say that we understand and appreciate both the service that you and your colleagues provided while active and the sacrifices made during your retirement. At the same time, we cannot offer encouragement with respect to the solutions which you seek. Many of the issues you address have been raised and responded to a number of times before with others acting either as individuals or on behalf of other groups of retired pilots. However, in the attached, I will address these issues in some detail (See Attachment A).

 

The main thrust of your letter is that pilots who retired from Delta were singled out for disparate treatment during the bankruptcy process and that therefore current management is acting without integrity and against Delta’s traditions by not giving retired pilots hundreds of millions of dollars now. We could not disagree more. 1. Disproportionate treatment and “given” a handout:  We could not disagree more with the characterization of our plight and request. No one can show us another employee group who took a larger percentage and/or total dollar loss than did the Delta retired pilots.  Disparate?  YES! Our chosen word is disproportionate to any other employee group either active or retired.  Should we compare our “contribution” to the financing of the “new” Delta, no other employee group even comes close. As you know, our losses helped in a large measure the financial turn-around of this great company.  We sacrificed while we were active to build a better Delta but in retirement we disproportionately sacrificed and our losses were in fact used to finance the strength of the company today.  Secondly, we are not asking to be “given” millions of dollars to us but we are asking for a study of our claims and the possibility of a “better” solution for our lost “earned” non-qualified benefits than what we received.  

 

Your arguments that retired Delta pilots receive “pennies on the dollar” or “no payments at all” in on-going monthly pension payments ignores completely the fact that the same group took well over a billion dollars of their earned pension benefits in lump sum payments as they left the company. In fact, as you know, more than 2000 Delta pilots retired early from the company in the few years leading up to our bankruptcy, many of them with the specific purpose of securing those lump sum pension payments. At the time, those actions threatened our ability to keep operating and may well have hastened our eventual bankruptcy filing. 2a. You got the lump sum so you should be happy:  This argument surfaces but always ignored that the lump represent ½ of earned retirement.  There are countless ways to illustrate this idea.  I can assure you that the company gets this but is unwilling to acknowledge or focus on the non-qualified, as we tried to get them to do, because that money was terminated completely in an unfair way. In fact, if you want to know the majority of your losses in this retirement debacle you need to look no further than the lost formula account which was the non-qualified portion  2a. Argument ‘who caused what’ not worth having: Quite frankly this is a chicken or the egg argument that we simply don’t see a benefit of arguing. Villifying the pilots for making personal individual decisions about what they needed to do to protect their family’s wellbeing is simply not productive.  We can all agree if management’s pension was in jeopardy and the company teetering, many in management would make the exact same decision as our Delta retiring pilots did. And in fact when management created golden parachutes they indeed sowed the seeds of distrust that hastened pilot decisions.  We maintain it is not helpful to vilify the retiring pilots for the situation that company found itself in.  Those huge loses to our retiring pilot group became an equally large windfall to help finance the company’s turnaround.  We never hear mention of that indisputable fact. The reason for our approaching the company is to simply make known the truth of hurting pilot families and the core reasons for it.  We seek to show examples on the personal level of what the average of our 3500 has experienced in losses. While the company speaks about the collective in terms of millions and billions in the hopes that large numbers will sound as if it all was fair enough.  When compared to NWA retired pilots or any other employee group of this great company, the individual financial harm is real and without equal.     

 

In addition, you do not credit at all the additional billions of dollars provided either to the Pension Benefit Guaranty Corporation (PBGC) or to retired pilots directly in the form of claims in the bankruptcy process or additional cash to help pay earned pensions.  3. Claimed failed credit: It isn’t a matter of crediting anyone for meeting a portion of earned pension obligations, rather it is a matter of documenting the actual losses “experienced” by our Delta retired pilots.  Using the term of millions or billions in a sentence does not replace the harm experienced on an individual basis within our group of over 3500 Delta retired pilots families.  The claim we are making is that terminations of the defined benefit plan and the non-qualified plan was unfair and disproportionate and that we believe if addressed by Delta there can be a huge public PR bonanza gained because of traditional concern shown by the corporation. 

 

In your letter, you also ignore completely the well documented facts that support that Delta’s pilot pension plan had unique features (among all the plans in place at both Delta and Northwest) that made it impossible for us to save that one plan. What about the 2^nd non-qualified plan you also terminated? We did not just decide to do this. We had to and did convince both the judge overseeing our bankruptcy case and a district court judge who heard that specific issue on appeal that this was the only way we could successfully reorganize. 4. Claim “we had to”: While we disagree in the main with the above statement, any corporate leadership makes its business decisions and that is of course water over that dam. Delta filed for bankruptcy and reorganized and to a large degree was financed in this newly formed company by the monies saved from terminated pilot plans.  That is of course history and we are not disputing it.  You mention that it was “impossible for us to save that one plan” but unfortunately you really mean two plans because there were two terminated plans that the retired pilot group suffered.  The “Unique features” mentioned are common with any high wage earning group due to IRS limitations.  When traditional pensions are restricted by the IRS then those unique features, that you refer to, are commonplace to every typical management team.  We all know that non-qualified deferred compensation plans are familiar to every upper manager.  We are simply asking the company to review our situation by authorizing an Executive Advisory Board to study our claims to see if there can be a better solution in the longstanding traditions of Delta to care for their own retirees.     

 

As for lost retiree medical benefits, all retirees in the bankruptcy were affected by those changes and pilots were not singled out in that aspect. Though this was a great retirement planning hit and harm for those within our group, and we see it as adding to the total losses and the disproportionate and unfair treatment of Delta retired pilot group.  We are, however, not seeking any improved solution for these lost medical benefits.

 

 

Captain Moser, I realize this is not the answer you and many retired pilots hoped to receive. As unfortunate as the termination of the pilot retirement plan and other bankruptcy changes were, we are simply not in a position to rewrite that piece of our history. Indeed, doing what you seek would expose the company to serious and significant litigation risk on a number of fronts including that we would essentially be treating one group of creditors more favorably than all others. 5. Can’t Show Favoritism: We are not seeking favoritism nor to be treated solely as an unsecured creditor but rather looked at as what we are, an employee group that took an unfair hit during the reorganization process.  When compared to any other employee group (not unsecured creditors) we shouldered a disproportionate level of unrecoverable harm, so we already have experienced the inequitable treatment.  We are simply asking for a review our situation and for the company to address members of the family with dignity and respect.  There is not a legal or otherwise constraint on finding a way to …….do the right thing!

 

Again, the fact that we cannot respond favorably to your request does not lessen at all the deep appreciation we have for all that our retired pilots and many other retirees of all backgrounds have done to help build and preserve the company. You have asked for a meeting to discuss these issues. I am the appropriate one to have such a meeting with you since I was the company officer with the most background on these issues. Should you wish, I would be happy to meet with you to discuss these issues and those on the attachments in more detail. You may contact me at (404) 715-4459 should you wish to schedule a meeting.

Sincerely,

Robert L. Kight

Vice-President – Global HR Services and Labor Relations

 

Attachment A

The following will briefly address the three main points raised in your letter and petition:

 

Qualified Plan Benefits –As we have noted before, the problems associated with restoring those amounts or the plan itself are insurmountable. Attached is a letter written to U.S Senators Saxby Chambliss and Johnny Isakson in late 2008 that explains in some detail these problems. That letter had as an attachment to it an earlier response to the DP3 organization, which is also attached. (See Attachment B). The essential issues have

not changed since that time.

In your letter and petition, you repeat the much circulated statement that during the bankruptcy proceedings, Delta attorneys stated that retired pilots would receive 80 to 90% of “their planned retirements” and that those statements were incorrect or misleading. That simply is not true. What our attorneys actually said was that, on

average, Delta estimated that retired pilots would receive 85% to 90% of their total qualified plan benefits. As part of this estimate, Delta made it clear that the amount included the value of the lump sums from all qualified plans. For your reference, I have attached relevant pages from one of Delta’s bankruptcy court filings which clearly describe the statements made by Delta at multiple times during the bankruptcy proceedings (See Attachment C). We are not aware of any representation made during our bankruptcy proceedings concerning the percentage replacement of total “planned retirement” (i.e. the combination of the Qualified and Non-qualified benefits) a retired pilot would receive.

We acknowledge that many retired pilots now receive little or no monthly benefit from the PBGC. However, the amount a retired pilot receives from the PBGC depends on a number of factors, particularly including the amount of the lump sum paid from the retirement plan at the time a pilot retired. The higher the lump sum, the lower amount paid from the PBGC. The reason for that is that the pilot contract required that the entire lump sum be paid from the qualified plan, even though the calculation was 50% of the total benefit including both the qualified and non-qualified portions. This resulted in a large percentage of the total amount payable from a qualified plan being paid in a lump sum at the time of retirement. This large lump sum payment left very little monthly benefit payable from the qualified plan, with most of the monthly benefit being paid from the non qualified plan. The PBGC only protected the qualified plan benefit and credited the value of the lump sum as retirement benefits already received. They determined the remaining monthly payment based on legal limits on the amounts that could be paid from the PBGC and this calculation often resulted in little monthly payment from the PBGC.

Nevertheless, if the amount payable from the PBGC is added to the value of the lump sum from the qualified plan, the statement that on average, retired pilots received between 85 to 90% of their qualified plan benefit remains accurate. We are confident that no pilot was misled and neither senior management nor our Board members are under any false impressions about these circumstances.   We simply disagree with the above statement and its persistent connotation.  The above statement simply misleads again the overall harm done to our pilot retirees.  We are focusing on the non-qualified benefits.  In that light you remain focused on the qualified benefits and we do not dispute that the 85-90% number concerning those benefits is close to being accurate.  However, what the company, and its legal team repeatedly refers to in briefs, is to repeat these 85-90% numbers as if that were the whole story.  What has consistently been done is to ignore that up to a full one half of our retirement would be non-qualified and in that regard we have irrefutable evidence that on average our retirees lost between 75-90% of those benefits.  This particularly hurts the retiree since that is the monies that come on a monthly basis in the form of an annuity.  So the overall pension loss, from our group of 3500 Delta retired pilots, far exceeds all estimates both in percentages and in total dollars of ANY other employee group during and since the bankruptcy process.  That is the basis of our claim of disproportionate and unfair treatment which belies the Delta tradition. 

 

Non-Qualified Plan Benefits – Because a significant portion of the qualified plan benefits were paid from qualified plans in a lump sum at the time of retirement, that left a significant amount of the remaining monthly payment for retired pilots to be paid from the non qualified plans. These amounts were simply an ongoing unsecured debt obligation; thus the retired pilots became unsecured creditors of Delta when that plan had

to be terminated along with the qualified plan during bankruptcy. As required under bankruptcy law, Delta treated all unsecured creditors, including retired pilots receiving benefits from the non qualified plan, in the same manner by providing a bankruptcy claim to the creditor. For the majority of claimants, that claim converted into stock in the “new” Delta. Delta was then and remains legally barred from treating one class of

unsecured creditors differently than others. Even if Delta could legally now do so, it would certainly be inequitable and unfair to other unsecured creditors to take that approach. In addition to these obstacles, any effort to provide any type of favorable treatment tied to the loss of the non qualified benefit could be viewed by the PBGC as an attempt to implement a prohibited restoration plan. Problems associated with this approach are covered extensively in Attachment B.  

 

A number of things here: We are not just another unsecured creditor group. Our 3500 Delta retired pilot families are former employees and part of the family of Delta who represent what was the foundation of Delta. Loyal competent employees that helped build the framework for the “new” Delta.  We are not locked forever in the category as just another unsecured creditor but rather we are and remain Delta family members and pilot retirees with no representation and no way to recover any lost benefits without intervention.  The active pilots who lost their non-qualified benefit were also unsecured creditors, yet they were able to regain and recover (with favoritism as you call it) a profit sharing, a new replacement DC plan, and bonuses.  Delta has exited the bankruptcy and the legal constraints and fetters of the bankruptcy process and now can deal with stock holders, employees (both active and former) in manners of traditional Delta policy.  We contend (and have yet to be proven otherwise) that no other employee group even comes close to the disproportionate percentage and total dollar losses of our retired pilot group.  While we recognize that stations and administrative staff all took salary hits (they have since in large measure recovered), no other employee group had two plans of their pension (the qualified DB plan and the non-qualifed plan) terminated.  The retired NWA pilots (who are now receiving benefits from a trust managed and funded by Delta) suffered nothing even close in comparison to what the Delta retired pilots did.  What was done legally simply doesn’t mean that it also was done ethically or morally.  There is no legal restriction then or now for Delta to find a way to do what it calls every employee to do and that is; “DO THE RIGHT THING!”  When the case is laid out, even a child can see the unfairness in what has happened to our own Delta retired pilots.  So with that, we are not asking you to believe and act on our claims today, but rather approve an Executive Advisory Board to study our claims once and for all and report back to leadership and the Directors a Delta solution steeped in the company’s tradition.   When the petition “Do the right thing” came up in this meeting, there was a refusal to admit that there was a right thing to do since there was no acknowledgement that we were disproportionately harmed.

 

Retiree Medical Benefits – With respect to your concern regarding modifications to your post retirement medical benefits, we believe that no group of retirees suffered disproportionately to any other group of retirees. All retirees had changes applied, and we fully acknowledge that sacrifice, but we also note that those retired pilots who had greater benefits than non pilots before bankruptcy maintained a difference in what they

received after bankruptcy. Retirees also received a bankruptcy claim for the modifications to their retiree medical benefits.

Finally, let me address two other points often raised in this context. First, we often hear that active pilots received both a claim and a note from the bankruptcy while, at least with respect to the note, there was no corresponding benefit for retired pilots. The claim and the note given to the active pilots covered a myriad of changes for active pilots, including cuts to pay rates of nearly 50%, termination of the retirement plan (both

qualified and non qualified and also recall that active pilots did not receive significant portions of their plan benefits through lump sum payments), changes in work rules and other benefits, as well as numerous other changes. While retired pilots did not get a note, the PBGC received both a note and a claim, and through their distribution methodology, the proceeds of each of those benefitted retired pilots to a much greater extent than active pilots covered by the plan. As noted above, retired pilots also received a claim for the lost value of their non qualified benefit and for retiree medical losses. Second, it is true that Northwest did not terminate its pilot plan during its bankruptcy and that Delta was not able to save its pilot plan due to its unique features described in Attachment B and above. Remember, the bankruptcy court judge in our case had to and did in fact agree

that Delta had no choice but to terminate the pilot’s pension plan in order to successfully exit bankruptcy. Recall also that a group of retired pilots appealed that decision to the district court, which upheld the decision that termination plan was necessary for us to exit bankruptcy (The order from the District Court is attached as Attachment D). The pension distinction that came with that merger was a result of the different structures of those two plans – not a result of some sort of desire to single out or target one constituency.  Time has past and the lost benefit window when it could have actually have been a benefit has passed with it to the detriment of the employee and the benefit of the company.   Though this was a great retirement planning hit and harm and adds to the disproportionate and unfair total loss of Delta retired pilot group, we are not seeking any improved solution to these lost medical benefits.  

 

                                  Meeting prep.

                                  Post meeting at Delta headquarters. 

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After meeting follow up email to Mr Kight, keeping our issue alive:

From: Mark Sztanyo

Date: 11/15/2013 4:59:39 PM

To: Mark Sztanyo

Subject: Thanks for Tues mtg and more

 

RE: Nov 12^th meeting

 

Dear Mr Kight,

First, we wish to thank you very much for hosting us and allowing us to meet on Tuesday to discuss issues that are extremely important to over 3500 Delta retired pilot families. 

We hope you were pleased with our fresh approach, with the tone of our discussions and even our simple request of an Executive Committee.  I’m sure you recognize that we were and still consider ourselves loyal Delta family members, and that we are very willing and able to work through issues.  We recognize that there are disagreements as to our positions.  We also recognize that there were items that we didn’t have the time to bring forward. 

We believe that honest and forthright dialogue is the basis of all great accomplishments. Relationships lead to constructive decisions. For these reasons we would like to have another meeting to discuss more fully certain positions that you raised and to bring other ideas forward.  

We sincerely believe that we are not only representative of these 3500 Delta retired families, but we also are volunteering on their behalf to seek better solutions to our level of financial harm.   Without new solutions, our group will remain disproportionately harmed by re-organization for the rest of our lives.  Since this issue will not go away  (without company intervention) neither will those who fight for it.

We look forward to further discussions to resolve our different positions and seek solutions. 

On behalf of over 3500 Delta retired pilots,

 

Scott Murray, Alan Price, Mark Sztanyo, and
 

 Rob Moser
Rmoser47@gmail.com

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