Firm News

Delta Settles With Retirees on Benefit Changes

October 5, 2006 Announcement

Atlanta, Georgia (October 5, 2006)  Delta Air Lines and the non-pilot retiree committee in its bankruptcy case reached agreement today over significant changes to retiree medical benefits.  The changes will help Delta to save tens of millions of dollars in the years ahead and will help it to exit bankruptcy, but also preserve some key benefits.  "We worked hard together to maintain some of the most critical benefits for the retirees who built this airline," said Cathy Cone, chair of the committee appointed by the bankruptcy court, "while recognizing the critical need to cut cost to save the company they built."

Bankruptcy law gives special protection to retiree medical benefits, including limited protections from changes during a Chapter 11 case.  "There are no happy faces in bankruptcy court," explained Dean Gloster of San Francisco's Farella, Braun & Martel, attorney for the retiree committee.  "But Delta agreed to protections for the remaining retiree medical benefits that we could never have gotten in litigation."  Among other things, the agreement between Delta and the retiree committee continues-at a reduced rate-subsidies for the tens of thousands who left Delta under early retirement programs and for retirees who are 65 and older.  It also includes provisions to reduce the hardship to individual retirees affected by the changes and will give bankruptcy claims to those whose benefits are reduced.  If approved by the Bankruptcy Court, the benefit changes will become effective on January 1, 2007.  The retiree committee is also working with Delta to try to provide a better value medical and prescription drug program for those 65 and older.

Previously, Delta Chief Financial Officer Ed Bastian had identified retiree medical benefits as a key remaining cost that Delta had to reduce in its restructuring effort.  Rob Kight, Vice President of Compensation, Benefits and Services, said "Throughout this very difficult and regrettable process, we appreciated the retiree committee's constructive work that recognized the very complex circumstances and the vastly different needs of Delta retirees and survivors.  Together we created solutions which have addressed this situation sensitively and equitably within the range of what the company can now afford."    

"We know that cutting costs in this bankruptcy was a matter of the company's survival," said Cone.  "In 2011 and 2013, when some of the new protections for benefits end, we hope Delta will be a much stronger company in position to continue those benefits, to take care of its retirees on small fixed incomes, because these benefits are also a matter of survival for them."

Delta Air Lines Retirement Committee
Cathy Cone, Chair

Farella Braun + Martel LLP
Dean Gloster, Partner

Cheryl Loof, Communications Manager

Traci Stuart, Allison & Partners
415.693.8934 x211

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