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Northwest will cooperate with pension probe

Northwest Airlines Corp. said on Wednesday that it will cooperate with Labor Department investigators looking into its underfunded pension plan.
/ Source: The Associated Press

Northwest Airlines Corp. said Wednesday that it will cooperate with Labor Department investigators looking into its underfunded pension plan.

The department is investigating "whether any person has violated or is about to violate" pension law, according to a letter sent with a subpoena issued in January.

Northwest fought the broad subpoena, saying it requested documents such as its business plan that would harm it if authorities disclosed them to competitors. The airline demanded that the Labor Department sign a confidentiality agreement, and a department representative signed one Monday, Northwest said.

The airline said it paid its pension obligations in full and on time until it filed for Chapter 11 bankruptcy protection Sept. 14. However, it did avoid a $65 million payment to its pension plan that would have been due the next day, it said at the time.

The subpoena also seeks any documents related to Northwest's decision to seek bankruptcy protection and asks for "all documents and communications" related to stock sales by officers or directors.

Northwest Chairman Gary Wilson sold off nearly all of his stake in the airline during the summer of 2005, including a series of sales made a few weeks before Northwest filed for Chapter 11 but not disclosed until afterward. The airline blamed the delay on an administrative error.

Northwest said the Pension Benefit Guaranty Corp. signed a similar confidentiality agreement before receiving Northwest documents last year. A spokesman at the PBGC, which takes over failed pension plans, referred questions about its document request to the Labor Department.

Before it filed for bankruptcy protection, Northwest said it owed catch-up pension payments of $800 million this year and $1.7 billion in 2007 to a plan that's underfunded by $3.8 billion. The PBGC calculates the shortfall at $5.7 billion.

But Northwest won't be paying that now that it's in bankruptcy. The airline said it has contributed enough to its pension plans to cover the benefits earned by employees since the date of its Chapter 11 filing.

"This is all that Northwest is legally allowed to do and more than some other bankrupt airlines have done," the company said.

In 2003, the Internal Revenue Service granted Northwest a five-year extension to make its catch-up pension payments. But it has been seeking a change in pension law that would allow it to spread those payments out.

"Northwest is seeking to preserve the pension plans and to pay off the unfunded amounts," it said. "Every other airline that recently has filed Chapter 11 has terminated its pension plans. Northwest is seeking another result."

If the law doesn't change, Northwest workers fear the company will dump the pensions on the PBGC. US Airways Group Inc. and UAL Corp.'s United Airlines each did that with some of their pensions. If that happens, some workers _ particularly pilots _ would get less.

That's exactly why the government is taking a close look at Northwest's pensions, said Gary Chaison, an industrial relations expert at Clark University in Worcester, Mass.

"They're very much worried that there's going to be a wholesale abandonment of pension plans," he said of the Labor Department. "They want to make it as difficult as possible."

A pension overhaul bill is being negotiated in a House-Senate conference committee. But only the Senate bill includes relief aimed specifically at the airline industry.

"We have every intention of making up the funding due" under the bill being considered in Congress, said Andrea Fischer Newman, the airline's senior vice president for government affairs.

Northwest is Michigan's largest passenger air carrier and has a hub at Detroit Metropolitan Airport.