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Northwest CEO Doug Steenland (second from right) testified during a Senate Finance Committee hearing in June on protecting employee pension plans. Also testifying were (from left) Duane Woerth, President of the Air Line Pilots Association, International; Glenn Tilton, CEO of United Airlines; and Gerald Grinstein, CEO of Delta Airlines. (Photo by Win McNamee/Getty Images)

When Northwest Airlines filed for bankruptcy, it gave much control over the company's future to a bankruptcy judge in New York. But the fate of one key element of Northwest's plan to return to profitability lies with a much more complex authority: The U.S. Congress. Seven months after Northwest first called for more time to pay off its pension debts, a bill that would ease the pension burden is stalled near the finish line.

St. Paul, Minn. — Northwest says under current law, it owes about $3.3 billion to its employee pension plans over the next three years. That's a stiff bill for a company losing millions of dollars a day. CEO Doug Steenland told the U.S. Senate Finance Committee in June that unless the company gets more time to pay off the debt, it could be forced to dump its pensions on the government-run pension insurance program, the Pension Benefit Guaranty Corporation.

"Northwest could be faced with a stark choice," Steenland said in his testimony. "We could follow United Airlines and US Airways, file for bankruptcy, and file to terminate our defined benefit plans. We all know this is a lose-lose approach. Alternatively, Congress can enact legislation that allows us to fully fund our defined benefit plans and make a gradual and orderly transition."

Congress has yet to act, and Northwest filed for bankruptcy last month. The transition Steenland refers to involves freezing the current pension plans and launching a more affordable 401K-style program in their place. Employees would be entitled to the full pension benefits they have earned so far.

If Northwest terminates the plans and leaves them with the P.B.G.C., on the other hand, payments for some workers would shrink substantially. The pilots union, in particular, has backed changes in pension law that might keep Northwest from dumping its plans.

Northwest and Delta sought 25 years to pay off their pension debts. Republican and Democratic committee leaders in the Senate ultimately agreed on 14 years, and extended the opportunity to other airlines

I wouldn't make the assumption that Northwest and Delta and any airlines in bankruptcy would decide to hang onto their pensions just because of that legislation. - Joel Denney, Piper Jaffray

For Northwest, the trouble is that Senate allies folded the relief into a bigger bill, "The Pension Security and Transparency Act of 2005." At the same time as it offers relief for companies like Northwest with deeply troubled pension plans, the bill would clamp down on other companies in financial difficulty. Under the bill, companies with a poor credit rating would face steeper insurance payments to the P.B.G.C.

The business lobby, led by General Motors and the U.S. Chamber of Commerce, reacted. So did a number of senators, including Minnesota Republican Sen. Norm Coleman.

Coleman says it doesn't make sense to make companies pay more based on their credit rating. "Even if you have a company whose pensions are truly safe, they've made all the payments into it, all of a sudden their liability is going to be measured on something that really and truly doesn't reflect the strength of the company, or at least its pension."

Coleman is a co-author of an amendment that would use the actual condition of pension plans, rather than a company's credit ratings, to determine its insurance payments. Supporters of the original bill say the threat of this amendment is now keeping the bill from getting a vote in the full Senate.

Coleman says his intention is not to kill the bill, much less hold up the pension relief for Northwest. He says internal Senate conversations lead him to expect a compromise in the next few weeks. "I anticipate we're going to get this through. It's the right thing to do and I'm hopeful it will happen," Coleman says.

Yesterday a key Senate committee passed an across-the-board PBGC premium hike, in hopes of pressuring Coleman, his Senate allies, and the business lobby to back down.

But some question whether any relief is already too late for Northwest. Joel Denney, head of investment research at Piper Jaffray, says keeping the pension plans would be better for employees. But in bankruptcy Northwest faces strong pressure from creditors to cut costs as deeply as possible.

"Even if Congress came through and gave that pension legislation, I wouldn't make the assumption that Northwest and Delta and any airlines in bankruptcy would decide to hang onto their pensions just because of that legislation," Denney says. "They may look at it and say, 'Look, we can save more money by turning this over to the government.'"

If a compromise on the broader issues allows the pension bill to pass the Senate, it must be reconciled with a House version that does not contain the specific relief. Northwest says it still supports "a legislative solution" to its pension issues. But the pressure is mounting for a decision on what to do with its pension plans.