President Bush's pension reform alternative is bad for all airlines with defined benefit plans, airline lobbyists said yesterday, and it could drive more carriers into bankruptcy and out of the defined-benefit system.
Delta and Northwest are looking to shift to 401K plans but under current rules they have to pay off their under-funded obligations in about three years, an option which several airline execs say is too fast and too expensive.
Airlines also oppose the President's yield curve proposal and plan to use a company's credit-worthiness to determine funding or Pension Benefit Guaranty Corporation (PBGC) premium obligations. "Four years ago, most airlines were investment grade," one industry source told The DAILY, noting the volatility of credit as a litmus test.
Delta and Northwest have met with the Administration on a strategy to freeze their defined-benefit plans to give them time to pay off the under-funded portions, but sources said the White House appears to favor neither legislation that carves out industry-specific rules nor changes to its current proposal, even if it forces airlines into bankruptcy.
Administration officials didn't return calls yesterday seeking comment, though early this week Treasury Assistant Secretary Mark Warshawsky said Bush's proposal more accurately reflects employers' health and eases the risks of masking economic realities.
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