Delta Airlines 2006 Annual Report Download - page 71

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Throughout the Chapter 11 proceedings, Comair has been in negotiations with the unions that represent its flight attendants, maintenance employees and
pilots to reduce the labor costs of each of these employee groups. On October 13, 2006, Comair reached a tentative agreement with the International
Brotherhood of Teamsters (“IBT”), which represents Comair’s approximately 880 flight attendants. The tentative agreement was ratified by Comair’s flight
attendants and approved by the Bankruptcy Court. It became effective December 31, 2006, and becomes amendable December 31, 2010.
Earlier in 2006, Comair reached agreements with the International Association of Machinists and Aerospace Workers (“IAM”) and ALPA, which
represent Comair’s approximately 535 maintenance employees and 1,345 pilots, respectively. These agreements were, however, conditioned on Comair’s
obtaining certain labor cost reductions under its collective bargaining agreement with the IBT. Because the Bankruptcy Court denied in April 2006 Comair’s
initial motion to reject its collective bargaining agreement with the IBT, Comair reduced the amount of flight attendant labor cost reductions it sought and
received from the IBT to a level below that required by the conditions in the agreements with the IAM and ALPA. As a result, Comair was required to
renegotiate its cost reduction agreements with the IAM and ALPA.
On October 18, 2006, Comair reached an agreement with the IAM that has been approved by the Bankruptcy Court and is not conditioned on Comair’s
reaching agreements with the IBT or ALPA. This agreement became effective December 31, 2006, and becomes amendable December 31, 2010. Because
Comair was not able to reach an agreement with ALPA on pilot labor cost reductions, on November 2, 2006, Comair filed a motion with the Bankruptcy
Court under Section 1113 to reject Comair’s collective bargaining agreement with ALPA. The Bankruptcy Court granted this motion on December 21, 2006.
On December 29, 2006, Comair and ALPA entered into an agreement whereby, among other things, Comair agreed not to implement certain changes to
the ALPA collective bargaining agreement, and ALPA agreed not to call a strike of Comair pilots, before February 2, 2007. The Bankruptcy Court extended
this agreement until February 9, 2007, and the parties subsequently extended it to February 12, 2007.
On February 7, 2007, the Bankruptcy Court granted Comair’s motion to enjoin a strike or other job action by ALPA and its members. ALPA has
appealed the Bankruptcy Court’s (1) Section 1113 ruling to the U.S. District Court for the Southern District of New York and (2) ruling enjoining a strike to
the U.S. Court of Appeals for the Second Circuit. ALPA has agreed to withdraw these appeals if the tentative agreement described in the next paragraph
becomes effective.
On February 12, 2007, Comair and ALPA reached a tentative agreement to reduce Comair’s pilot labor costs. The agreement is subject to ratification by
Comair pilots and Bankruptcy Court approval. If ratified and approved, the agreement would become effective March 2, 2007, and become amendable on
March 2, 2011. We cannot predict the outcome of this matter.
Settlement Agreement with the PBGC. On December 4, 2006, we entered into a comprehensive settlement agreement with the Pension Benefit Guaranty
Corporation (the “PBGC”) regarding the termination of the Pilot Plan. For information regarding this agreement, see Note 10.
Payment of Insurance Benefits to Retired Employees.Section 1114 of the Bankruptcy Code addresses a debtor’s ability to modify certain retiree
disability, medical and death benefits (“Covered Benefits”). To modify Covered Benefits, the debtor must satisfy certain statutorily prescribed procedural and
substantive prerequisites and obtain either (1) the Bankruptcy Court’s approval or (2) the consent of an authorized representative of retirees. The debtor must
make a proposal to modify the Covered Benefits based on the most complete and reliable information available at the time, must bargain in good faith and
must share relevant information with the retiree representative. In addition, the proposed modifications must be necessary to permit the reorganization of the
debtor and must ensure that all affected parties are treated fairly and equitably relative to the creditors and the debtor.
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