US - Airline unions have voiced strong concerns that a proposed Delta/Northwest Airlines merger will put at stake employees' pensions and threaten the solvency of the Pension Benefit Guaranty Corporation (PBGC).
Roach said: "If the combined giant airline fails and needs bankruptcy court protection, like the two separate companies sought on the same date in 2005, the frozen company-sponsored pension plans could be thrust upon the PBGC.
"This would burden the PBGC with more than US$15.6bn in liabilities on top of its $13.1bn deficit for fiscal year 2007."
Jeffrey Speicher, spokesperson for the PBGC, told Global Pensions the PBGC was already responsible for Delta's pilots' pension plan, which accounted for $920m of unfunded liabilities. He added: "The financial condition of the PBGC is well known. We have sufficient assets to pay benefits for a number of years and at some point we might face a cash flow shortage, but we are not there yet.
"I would point out that over 75% of the loss the PBGC has experienced has come from two industries: steel and airlines."
Testifying at the hearing, Robert Kight, vice president, compensations and benefits, Delta Airlines, said they fully intended to maintain both the Delta and Northwest plans following the merger.
Gary Ford, principal, Groom Law Group, representing Northwest, said the funding requirements and the other rules applicable to the pension plans of Northwest would not be altered by a merger with Delta.
Ford concluded: "The major claims on the PBGC are not principally a result of the pension plan itself, but rather of financial distress, culminating in bankruptcy, of the company's pension plan.
"It is no exaggeration to say that the key to secure employee benefits in the airline industry is financially strong airlines that can shoulder the cost of those benefits."
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