Delta Airlines 2006 Annual Report Download - page 109

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Significant Events in 2006
ALPA Agreement
In June 2006, we reached a comprehensive agreement with ALPA reducing Delta’s pilot labor costs. The agreement, among other things:
•amended our postretirement healthcare plan for pilots (1) to increase healthcare premiums for pilots who retire after June 1, 2006 and their
survivors prior to age 65 and (2) to provide that pilots who retire after June 1, 2006 are not eligible for our subsidized post-age 65 healthcare
coverage. This amendment was accounted for as a negative plan amendment under SFAS No. 106, “Employer’s Accounting for Postretirement
Benefits Other than Pensions” (“SFAS 106”). It reduced the accumulated plan benefit obligation (“APBO”) for this plan by $63 million.
•amended our disability and survivorship plan for pilots (“Pilot D&S Plan”) to replace survivor benefits and basic life insurance coverage with term
life insurance for pilots who retire on or after January 1, 2008. This amendment reduced the APBO for the Pilot D&S Plan by $65 million.
•provided that ALPA would not oppose the termination of the Pilot Plan and that the non-qualified defined benefit pension plans for pilots would be
terminated if the Pilot Plan was terminated. The Pilot Plan and these non-qualified plans were terminated effective September 2, 2006.
•changed our contribution to the Delta Pilots Defined Contribution Plan to 9% of covered pay for all pilots, effective upon termination of the Pilot
Plan. Prior to this change, pilots received a contribution between zero and 23% of covered pay, based on the pilot’s age and years of service on
January 1, 2005.
For additional information regarding our comprehensive agreement with ALPA, see “Collective Bargaining Agreements” in Note 1.
1114 Committee Agreements
In October 2006, we and the two separate retiree committees appointed under Section 1114 of the Bankruptcy Code reached agreements (“1114
Agreements”) which modified our postretirement benefit plan obligations by, among other things, increasing the current retirees’ share of healthcare costs.
The 1114 Agreements also eliminate Delta’s current post-age 65 coverage for non-pilot retirees, but provide a subsidy for certain non-pilot retirees that can be
applied to alternative coverage to be made available through the 1114 non-pilot retiree committee. The 1114 Agreements provided retirees an allowed general,
unsecured pre-petition claim of $539 million, which was recorded in reorganization items, net with a corresponding offset in liabilities subject to compromise.
The amendment of our postretirement plans reduces participant benefits and is accounted for as a negative plan amendment under SFAS 106, reducing the
APBO for these plans by $796 million. For additional information regarding these retiree committees, see “Payment of Insurance Benefits to Retired
Employees” in Note 1.
Termination of Pilot Plan and PBGC Settlement Agreement
In June 2006, we sent to participants and beneficiaries a Notice of Intent to Terminate the Pilot Plan effective September 2, 2006. In September, the
Bankruptcy Court found that we met the financial requirements for a distress termination of the Pilot Plan and, in December 2006, we reached a
comprehensive settlement agreement (the “PBGC Settlement Agreement”) with the PBGC providing for such termination. In accordance with the PBGC
Settlement Agreement, the PBGC became trustee of the Pilot Plan effective December 31, 2006, and the effective date of the termination of the Pilot Plan was
deemed to be September 2, 2006.
Pursuant to the PBGC Settlement Agreement, the PBGC received an allowed general, unsecured pre-petition claim against each of the Debtors in the amount
of $2.2 billion, but recoverable solely against Delta (“PBGC Claim”). The PBGC Settlement Agreement also provided for the distribution to the PBGC of
senior unsecured notes (the “PBGC Notes”) in aggregate principal amount of $225 million, a term of up to 15 years and an annual interest rate calculated to
ensure that the notes trade at par on the issuance date. We may replace all or a portion of the principal amount of the PBGC Notes with cash prior to the
issuance, which we are required to do under certain circumstances. We also agreed to enter into a registration rights agreement in connection with the PBGC
Settlement Agreement.
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