Tuesday, July 23, 2024
Go to The future of Northwest Airlines
The future of Northwest Airlines
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Northwest retirees worried about their pensions
Northwest Airlines' bankruptcy filing has raised serious questions among workers and retirees about the pension benefits they've been promised. Airline officials say they want to avoid handing off their pension obligation on the federal government. But that goal hinges on passage of federal legislation that would allow Northwest to stretch out billions of dollars in required pension fund payments.

St. Paul, Minn. — Northwest Airlines' move to bankruptcy court came as unsettling news for Linda Harris of Niceville, Florida, a former Northwest flight attendant. Her husband is a retired Northwest pilot, and their family lives on his monthly pension checks.

Harris said she's worried about the possibility of losing income and insurance as Northwest reorganizes in bankruptcy.

"They will look at people like us who retired with a good salary, who have medical insurance, who earned all these things," says Harris. "And they do whatever they can to take advantage of any monetary obligations they have in order to survive."

In its filing for Chapter 11 bankruptcy protection, Northwest Airlines highlighted a pension deficit that's now reached $3.8 billion. Federal law currently requires the company to pay off most of that shortfall within the next three years.

Northwest CEO Doug Steenland said the airline will continue seeking changes in pension law that would spread out those payments over a longer period of time.

"We are determined to continue to push for that legislation, so that we'll be in a position to preserve pension benefits that our employees have earned to date," said Steenland. "And that hopefully we'll be able to avoid the kind of pension plan termination that the employees of United and US Airways encountered."

That means Northwest hopes to bypass the Pension Benefit Guaranty Corp., a federal agency that takes over when employers default on their pension obligations. Officials with the PBGC said Northwest can't dump its obligations on the agency unless it cannot exit from bankruptcy without terminating its pension plan.

Joseph Schwieterman is a transportation expert and professor at DePaul University, who has closely followed the United Airlines bankruptcy. He said a pension default affects the retirement income of some employee groups more than others.

"There's kind of an interesting dynamic there, where the pilots in many ways have the most to lose," says Schwieterman. "Because the pension board caps the amount you can receive at something in the mid-$40,000 range. Pilots are often entitled to much more than that, but flight attendants are not."

Schwieterman said pilots at United were more accepting of the pension cancellation than other unions, because they wanted to preserve their jobs and salaries.

Mark McClain, the head of Northwest's pilots association, said his focus is on saving jobs too. But McClain said he doesn't believe the Northwest pensions are in jeopardy -- if Congress grants the airline a new, more lengthy payment schedule.

"If those are amortized over a number of years, they're not a significant drain on the operating budget for the carrier. You're spreading the payments out over time," says McClain. "That, in conjunction with freezing our pension plan that we've been in discussions to do, should provide the type of relief necessary to maintain the benefits we have." Northwest's CEO Doug Steenland said the carrier has strong and committed supporters in Congress trying to make the needed changes in pension law. U.S. Sen. Norm Coleman, R-Minn., is one of the airline's allies on the issue, and co-author of a pension reform bill. He said nearly 22,000 Minnesota residents are Northwest pensioners, and they're counting on common sense to prevail.

"First and foremost, we have to make sure that the pension obligations are met. Two, it doesn't help for them to be dropped into the lap of the Pension Benefit Guaranty board. They're already overwhelmed," says Coleman. "And three, there is some legislation and ways to do that by simply amortizing payments over a longer period of time."

Coleman says he thinks Congress could realistically act on pension reform legislation by the end of November.