A continuing exodus of Delta Air Lines Inc. pilots has drained the pension plan to the point where future lump sum payouts to retirees by the bankrupt carrier may be in jeopardy, according to the union.
The chairman of the pilot union's executive committee, John Malone, said in a letter to members Tuesday night there is a significant likelihood that lump sum payments will not be immediately available to pilots who are considering retirement on or after Oct. 1.
Part of the reason, Malone said, is the high number of pilots who have retired, many of them early, over the last 21 months. There were 202 pilots who retired Sept. 1, two weeks before Delta's bankruptcy filing, and more that 2,300 have put in their papers since January 2003, Malone said.
The normal pilot retirement age at Delta is 60. Senior pilots with enough years in can retire early at age 50. Delta pilots who retire can elect to receive half their pension benefits in a lump sum and the other half as an annuity later. It's unclear what the value of the annuity would be under any future bankruptcy plan.
Malone said management has informed the union that the lump sums due to pilots who retired Sept. 1 will create a cash shortfall for the pension plan, forcing the company to make up for it with a special contribution to the plan.
If the company doesn't make that contribution — its recent statements suggest it won't — the plan would be prohibited from doling out future lump sum payments until the shortfall is erased.
"Your union has been planning for all contingencies while trying to remain realistic about a very difficult business environment," Malone wrote in the letter.
News of the lump sum worries come as Atlanta-based Delta, the third largest U.S. carrier, prepares to announce later this week pay and benefit cuts for employees. The company also is planning more job cuts, but it is unclear when that will be announced.