Human Capital & Careers

PBGC, Northwest Agree to $14M Deal

The settlement does not absolve the bankrupt airline from its underfunded pension plans.
Stephen TaubJanuary 25, 2007

The Pension Benefit Guaranty Corp. has worked out a deal with Northwest Airlines on the company’s overdue PBGC insurance payments.

The bankrupt airline agreed to pay $14 million in premiums due under its pilots’ pension plan, according to the Associated Press,which cited PBGC spokesman Gary Pastorius. The PBGC, in turn, agreed to release Northwest from liens on its assets.

The wire service noted that the deal still does not resolve Northwest’s underfunded pension plans. When Northwest filed for bankruptcy protection in September 2005, the PBGC said its pension fund was underfunded by $5.7 billion.

Under the Pension Protection Act signed into law by President Bush in August, airlines received an extra 10 years to meet funding obligations, the AP noted.

Could Northwest’s financial troubles be helped by joining forces with another airline? Earlier this week, The Wall Street Journal reported that Northwest and Delta Air Lines have been in “detailed” discussions about a potential merger. It added that conversations have covered “potential structures, processes, and timetables” of a deal. However, according to Reuters, Delta chief executive Gerald Grinstein said in an employee newsletter sent Tuesday that the company is not in merger talks with Northwest.