Delta Air Lines responded Monday to criticism of its executive compensation by altering its bankruptcy-proof pension program for 35 top officials to reduce the $65 million it would have cost the company by next year.
DELTA WOULD NOT say how much the changes would save the nation’s third-largest airline, but said they were necessary to show that all employees, even executives, need to make sacrifices to save the struggling carrier.
The Atlanta-based airline created the executive pensions in 2002 and would have fully funded them at a cost of $65 million by early next year. The money was to cover the pensions for 35 executives, who receive only partial benefits if they retire early.
Delta has said that the pension trusts were needed to guarantee the executives’ retirement benefits and to protect them from any financial troubles the airline had, including bankruptcy.
The changes reduce the amount of payout that the airline would be required to make in 2004, but only apply to chief executive Leo Mullin, chief financial officer Michele Burns, chief marketing officer Vicki Escarra, president Fred Reid and executive vice president for human resources Bob Colman. A Delta spokeswoman declined to offer more specifics.
The airline also said it is reducing the amount of incentive pay for top executives.
Debate about the costly retention program followed news that three of the 35 executives in the program have left and taken their pensions with them.
John Boatright, Michael Young and Bob Harkey announced their retirements within the past year.
Delta said they will receive pension payments based on length of service, but refused to say how much.
Harkey, Delta’s general counsel, will leave the company by the end of the year after 35 years with the airline. Boatright, a vice president of corporate real estate, retired Dec. 31; Young, vice president of community relations, retired June 1.
The news about executive pensions comes as Delta seeks deep concessions from pilots and after Delta accepted millions in government aid.
Delta has said it wants to cut pilots’ hourly wages by 22 percent, cancel pay raises due over the next year and reduce some benefits. The airline also wants to rescind a 4.5 percent raise the pilots received May 1 and a similar raise due next May.
Meanwhile, Delta’s employee-pension obligations are underfunded by about $4.9 billion by some estimates. The airline said its estimate pegs the figure at $2 billion.
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