Delta Air Lines Loses Three Executives
Friday August 8, 4:15 pm ET
Delta Air Lines Loses Three Executives, Despite Costly Retention Program
ATLANTA (AP) -- Three of 35 Delta Air Lines executives covered by a bankruptcy-proof pension program the airline set up to retain top executives have either left or are leaving and are taking their pensions with them, the company said Friday.
The disclosure, first reported in Friday's editions of The Wall Street Journal, comes even as Delta's employee-pension obligations for other workers are underfunded by billions of dollars and the nation's third biggest carrier is seeking hefty pay concessions from its pilots.
Delta executives John Boatright, Michael Young and Bob Harkey announced their retirements within the past year. Atlanta-based Delta said they will receive pension payments based on length of service under a special pension plan created last year, but refused to say how much.
"We feel that three people is a very small number in comparison to the vast majority of Delta executives that remain and continue to work to strengthen Delta during these difficult financial times," spokeswoman Catherine Stengel said.
Delta created the executive pensions in 2002 and will have fully funded them at a cost of $65 million by early next year. The money will cover the pensions for 35 executives, who receive only partial benefits if they retire early.
Harkey, Delta's general counsel, will leave the company by the end of the year after 35 years with the airline. Boatright, a vice president of corporate real estate, retired Dec. 31; Young, vice president of community relations, retired June 1.
The Journal reported that Delta made a $2.4 million trust payment for Harkey, $363,000 for Boatright and $111,000 for Young.
Meanwhile, Delta's employee-pension obligations are underfunded by about $4.9 billion by some estimates, but the airline notes that figure is based on the assumption the plan's assets will remain stagnant and every employee will stay with the company until retirement age. The airline said its estimate pegs the figure at $2 billion.
Delta has said it set up the pension trusts for selected executives to guarantee the employees' retirement benefits and to protect them from any financial troubles the airline had, including bankruptcy.
Internal documents obtained by The Wall Street Journal detail $25.6 million in trust payments made in 2002, including payments the company made to cover the tax liabilities for the employees. Delta refused to release the documents Friday to The Associated Press.
The news about executive pensions comes as the nation's third-largest airline seeks deep concessions from pilots and after Delta accepted millions in government aid.
Karen Miller, a spokeswoman for the Delta Air Line Pilots Association, said the union is more concerned with protecting its pilots than with the executive pensions. The union is currently at a standstill with management over the company's request for hefty wage cuts.
"The pilots are married to the company," Miller said. "They cannot leave. They don't have golden parachutes. That's why the pilots have stepped forward in mid-contract to try to help the company out."
Last month, the union decided to break off negotiations until management addresses what the union calls significant philosophical differences between the company and its pilots.
Delta has said it wants to cut pilots' hourly wages by 22 percent, cancel pay raises due over the next year and reduce some benefits. The airline also wants to rescind a 4.5 percent raise the pilots received May 1 and a similar raise due next May.
In trading Friday on the New York Stock Exchange, Delta shares rose 23 cents to close at $10.77.
Friday August 8, 4:15 pm ET
Delta Air Lines Loses Three Executives, Despite Costly Retention Program
ATLANTA (AP) -- Three of 35 Delta Air Lines executives covered by a bankruptcy-proof pension program the airline set up to retain top executives have either left or are leaving and are taking their pensions with them, the company said Friday.
The disclosure, first reported in Friday's editions of The Wall Street Journal, comes even as Delta's employee-pension obligations for other workers are underfunded by billions of dollars and the nation's third biggest carrier is seeking hefty pay concessions from its pilots.
Delta executives John Boatright, Michael Young and Bob Harkey announced their retirements within the past year. Atlanta-based Delta said they will receive pension payments based on length of service under a special pension plan created last year, but refused to say how much.
"We feel that three people is a very small number in comparison to the vast majority of Delta executives that remain and continue to work to strengthen Delta during these difficult financial times," spokeswoman Catherine Stengel said.
Delta created the executive pensions in 2002 and will have fully funded them at a cost of $65 million by early next year. The money will cover the pensions for 35 executives, who receive only partial benefits if they retire early.
Harkey, Delta's general counsel, will leave the company by the end of the year after 35 years with the airline. Boatright, a vice president of corporate real estate, retired Dec. 31; Young, vice president of community relations, retired June 1.
The Journal reported that Delta made a $2.4 million trust payment for Harkey, $363,000 for Boatright and $111,000 for Young.
Meanwhile, Delta's employee-pension obligations are underfunded by about $4.9 billion by some estimates, but the airline notes that figure is based on the assumption the plan's assets will remain stagnant and every employee will stay with the company until retirement age. The airline said its estimate pegs the figure at $2 billion.
Delta has said it set up the pension trusts for selected executives to guarantee the employees' retirement benefits and to protect them from any financial troubles the airline had, including bankruptcy.
Internal documents obtained by The Wall Street Journal detail $25.6 million in trust payments made in 2002, including payments the company made to cover the tax liabilities for the employees. Delta refused to release the documents Friday to The Associated Press.
The news about executive pensions comes as the nation's third-largest airline seeks deep concessions from pilots and after Delta accepted millions in government aid.
Karen Miller, a spokeswoman for the Delta Air Line Pilots Association, said the union is more concerned with protecting its pilots than with the executive pensions. The union is currently at a standstill with management over the company's request for hefty wage cuts.
"The pilots are married to the company," Miller said. "They cannot leave. They don't have golden parachutes. That's why the pilots have stepped forward in mid-contract to try to help the company out."
Last month, the union decided to break off negotiations until management addresses what the union calls significant philosophical differences between the company and its pilots.
Delta has said it wants to cut pilots' hourly wages by 22 percent, cancel pay raises due over the next year and reduce some benefits. The airline also wants to rescind a 4.5 percent raise the pilots received May 1 and a similar raise due next May.
In trading Friday on the New York Stock Exchange, Delta shares rose 23 cents to close at $10.77.
