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Northwest to cooperate with pension probe
By Joshua Freed, AP Business Writer
Rocky Mountain News
Thurday, March 16, 2306

MINNEAPOLIS (AP) -- Northwest Airlines Corp. said on Wednesday that it will cooperate with Labor Department investigators investigating its underfunded pension plan.

The agency is investigating "whether any person has violated or is about to violate" pension law, according to a letter sent with the subpoena issued in January.

Northwest fought the broad subpoena, saying it requested documents such as its business plan that would harm it if the department disclosed them to competitors. Northwest demanded that Labor sign a confidentiality agreement, which the department signed on Monday, Northwest said.

Northwest said it paid its pension obligations in full and on time until it filed for Chapter 11 bankruptcy protection.  However, by filing for protection on Sept. 14, it did avoid a $65 million payment to its pension plan that would have been due the next day.

When a company files for protection all creditors are stayed or prevented from enforcing their claims.

The subpoena also seeks any documents related to Northwest's decision to seek bankruptcy protection, and asks for "all documents and communications" related to stock sales by officers or directors.

Northwest Chairman Gary Wilson sold off nearly all of his stake in the airline during the summer of 2005, including a series of sales made a few weeks before Northwest filed for Chapter 11 protection, but not disclosed until afterward.  The airline blamed the delay on an administrative error.

Northwest said the Pension Benefit Guaranty Corp. signed a similar confidentiality agreement before receiving Northwest documents last year.

Before it filed for bankruptcy protection, Northwest said it owed catch-up pension payments of $800 million this year and $1.7 billion next year to a plan that's underfunded by $3.8 billion.  The PBGC calculates the shortfall at $5.7 billion.

But it won't be paying that since it is now in bankruptcy.  The airline said it has contributed enough to its pension plans to cover the benefits earned by employees since the date of its Chapter 11 filing.

"This is all that Northwest is legally allowed to do and more than some other bankrupt airlines have done," the company said.

"Northwest is seeking to preserve the pension plans and to pay off the unfunded amounts," it said.  "Every other airline that recently has filed Chapter 11 has terminated its pension plans. Northwest is seeking another result."

In 2003, the Internal Revenue Service granted Northwest a five-year extension to make its catch-up pension payments.  But it has been seeking a change in pension law that would allow it to spread those payments out.

If the law doesn't change, Northwest workers fear the company will dump the pensions on the Pension Benefit Guaranty Corp., which takes over failed pensions. UAL Corp.'s United Airlines and US Airways Group Inc. each did that with some of their pensions during their own reorganization cases.  If that happens, some workers - particularly pilots - would get less.

That's exactly why the government is taking a close look at Northwest's pensions, said Gary Chaison, an industrial relations expert at Clark University in Worcester, Mass.

"They're very much worried that there's going to be a wholesale abandonment of pension plans," he said of the Department of Labor.  "They want to make it as difficult as possible."

A pension overhaul bill is being negotiated in a House-Senate conference committee. 
But only the Senate bill includes relief aimed specifically at the airline industry.

Joshua Freed can be reached at jfreed(at);