Airlines Seek Pension Relief

Some U.S. airlines are hoping spring will bring relief for the industry's looming pension crisis in the form of government reform.

But while House and Senate committees could take up pension proposals this month, it remains to be seen whether they'll offer the specific industry help for which several carriers have been lobbying vigorously.

American Airlines' parent AMR (AMR), Delta Air Lines (DAL) and Northwest Airlines (NWAC) have been asking lawmakers for more time -- in Delta's case, the request is for as long as 30 years -- to meet unfunded pension obligations. Delta, which has been particularly aggressive in its efforts, argues that such relief would allow airlines to meet their obligations, thus keeping promises to workers and saving government insurers from having to pick up the tab.

Handicapping the odds is tough, according to observers. "One would think that delegations from cities and states with large airline hubs would be most sympathetic," said Stuart Klaskin, a partner at KKC Aviation Consulting in Miami. "Not only do they have those companies as constituents, but also thousands of pension-deserving airline employees as voters."

On the other hand, some lawmakers may wish to avoid the perception they're again extending special help to an industry that has already been offered billions of dollars of aid from the government after the Sept. 11, 2001, terror attacks.

"I'm getting a sense that Congress made a major move a couple of years ago to assist the industry and that they have reservations about doing further reform," said John Kasarda, a professor of management at the University of North Carolina's Kenan-Flagler Business School who specializes in aviation issues. "There's a growing sense that we have excess capacity in the airline industry and that market forces need to play themselves out."

Network carriers face a huge gap between the value of their defined-benefit pension plans -- in which workers are promised specific payment amounts when they retire -- and future obligations. The Pension Benefit Guaranty Corp., the government's pension insurer, estimates that the industry's under-funding totaled $31 billion in 2003. (The agency is calculating 2004's number.) That's up from under-funding of only $3 billion in 2000.