Accused of Diverting Funds From Retiree Trust Fund
By Evan Perez, Staff Reporter
THE WALL STREET JOURNAL
December 6, 2005
A bankruptcy court-appointed committee of Delta Air Lines
retirees accused the carrier of improperly diverting more
than $30 million from a trust fund set up to pay benefits to
widows and dependents of retirees for other employee
The committee said in a filing with the U.S. Bankruptcy
Court in New York, which is overseeing Delta's Chapter 11
reorganization, that the Atlanta-based carrier improperly
used the money to pay severance benefits to employees since
2002 in violation of the regulations governing the trust
fund. The committee last month won the right to represent
the interests of 10,000 non-pilot retired workers.
John Kennedy, a spokesman for the airline said, "Delta
strongly believes it has acted properly and has administered
the trust for purposes fully recognized under the law."
The filing from the retiree group is the first signal of
battles over retiree benefits that are likely to come if
Delta follows in the footsteps of other bankrupt carriers by
trying to shed its underfunded pension obligations. Delta
says it hasn't decided what to do about its pensions and is
awaiting possible relief from legislation pending in the
U.S. Congress which could give it more time to catch up on
its pension obligations.
Delta, which filed for bankruptcy court protection on Sept.
14, is the least unionized of the major U.S. airlines and,
partly because of that distinction, its bankruptcy
proceedings were expected to feature less sparring with
employee groups than at other carriers.
However, the airline's restructuring efforts have already
run into challenges amid a standoff with its union pilots
over the company's efforts to dump the pilots' collective
bargaining agreement and impose about $325 million wage and
benefits cuts. Meanwhile, the retirees, by winning a
court-appointed committee, now get a say when the company
turns its attention to their benefits. Delta's largely
non-union workforce doesn't have a separate representative
in the bankruptcy proceedings. Delta says it can't afford
to have further delays in its restructuring because it is
burning through $5 million a day.
Cathy Cone, chairwoman of the retiree committee, said the
retirees believe Delta failed to properly notify
beneficiaries of its use of the money and that the company
should repay the money into the trust fund.
However, Rob Kight, Delta's vice president of compensation
and benefits, said U.S. Treasury regulations allow the
company to use the trust fund for several of its benefits
plans and that the company has followed the rules in
notifying beneficiaries of the individual plans of any
Separately, Delta's request to reject its pilots contract is
being heard in a New York bankruptcy court, with the judge
pushing the company and the union to try to reach a
compromise. The judge hasn't ruled on Delta's request.
Write to Evan Perez at