Delta Airlines 2006 Annual Report Download - page 115

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
During 2006, we recorded a settlement gain of $1.3 billion related to the termination of both the Pilot Plan and the non-qualified plans in reorganization
items, net, as discussed above.
During 2005 and 2004, we recorded settlement charges totaling $388 million and $257 million, respectively, on our Consolidated Statement of
Operations. These charges primarily related to the Pilot Plan and resulted from lump sum distributions to pilots who retired.
During 2005, we recorded a net curtailment loss of $434 million on our Consolidated Statement of Operations. The $434 million net curtailment loss
consists of (1) a $13 million curtailment gain recorded in the December 2005 quarter related to the freeze of benefit accruals effective December 31, 2005 for
the Non-pilot Plan and (2) a curtailment loss of $447 million related to the impact of the reduction of non-pilot jobs announced in November 2004 and the
freeze of service accruals under the Pilot Plan effective December 31, 2004. Additionally, in the December 2004 quarter, we recorded a $527 million
curtailment gain related to the elimination of subsidized retiree medical benefits for eligible employees who retire after January 1, 2006.
Assumptions
We used the following actuarial assumptions to determine our benefit obligations at September 30, 2006 and 2005 and our net periodic (benefit) cost for
the years presented, as measured at September 30:
Benefit Obligations (1) 2006 2005
Weighted average discount rate 5.88% 5.69%
Rate of increase in future compensation levels 0.36% 0.72%
Assumed healthcare cost trend rate(2) 8.50% 9.50%
Net Periodic Benefit Cost (3) 2006 2005 2004
Weighted average discount rate — pension benefit 5.67% 5.81% 6.09%
Weighted average discount rate — other postretirement benefit 5.65% 6.10% 6.05%
Weighted average discount rate — other postemployment benefit 5.72% 6.10% 6.13%
Rate of increase (decrease) in future compensation levels 0.72% (1.28)% 1.89%
Expected long-term rate of return on plan assets 9.00% 9.00% 9.00%
Assumed healthcare cost trend rate(2) 9.50% 9.50% 9.00%
(1) Our 2006 and 2005 benefit obligations are measured using the RP 2000 combined healthy mortality table projected to 2006.
(2) The assumed healthcare cost trend rate is assumed to decline gradually to 5.00% by 2010 for health plan costs and remain level thereafter.
(3) Our 2006, 2005, and 2004 assumptions reflect various remeasurements of certain portions of our obligations and represent the weighted average of the assumptions used for each
measurement date.
The expected long-term rate of return on our plan assets was based on plan-specific investment studies performed by outside consultants who used
historical market return and volatility data with forward looking estimates based on existing financial market conditions and forecasts. Modest excess return
expectations versus some market indices were incorporated into the return projections based on the actively managed structure of our investment program and
its record of achieving such returns historically.
Assumed healthcare cost trend rates have an effect on the amounts reported for the other postretirement benefit plans. A 1% change in the healthcare cost
trend rate used in measuring the APBO for these plans at September 30, 2006, would have the following effects:
(in millions) 1% Increase 1% Decrease
Increase (decrease) in total service and interest cost $ 9 $ (7)
Increase (decrease) in the APBO 28 (48)
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