Northwest and Delta executives to make millions
> > bankruptcies
> > By Jerry Isaacs
> > 19 September 2005
> > Over the last several years the top corporate
> > executives at Northwest and Delta airlines
> > retirement packages guaranteeing them millions in
> > event the companies declared bankruptcy and
> > on their pension payments to employees. Both
> > filed for Chapter 11 bankruptcy protection last
> > Wednesday, in large measure to escape their
> > obligations and seek the bankruptcy court's
> > for sweeping cuts in airline workers' jobs, wages
> > benefits.
> > Since 2000, Delta has lost $10 billion, slashed
> > jobs and cut pay for pilots, managers and other
> > employees. Three years ago the company spent more
> > $44 million setting up trusts to protect
> > pension benefits from creditors in case of
> > saying the perk was needed to retain executives in
> > hard times. Because transferring money to
> > bankruptcy-proof trusts typically triggers big tax
> > bills for the executives, Delta inflated the
> > to compensate for the extra taxes.
> > Retiring CEO Leo Mullin, who was paid $13 million
> > compensation in 2001, was given 22 years of
> > seniority—although he worked for Delta for only
> > five-and-half years—boosting his retirement
> package to
> > $16 million. While incoming CEO Gerald Grinstein
> > a ceremonial pay reduction to bolster the
> > demands for sweeping employee wage and pension
> > behind the scenes other executives were cashing in
> > the benefits of their golden parachutes.
> > Former CEO Ronald Allen, who was forced out in
> > continued to draw $500,000 a year from Delta for
> > consulting services up until 2005, although
> > the company nor Allen would say whether he ever
> > provided any such services. Allen's exit package
> > included a $4.5 million cash severance payment and
> > $765,000-a-year pension that continues. He also
> got 10
> > years' worth of perks, such as a 2,090-square-foot
> > Buckhead, Georgia office, a car and club
> > provided by Delta.
> > When Northwest Airlines CEO Richard Anderson left
> > company last year, he took his pension in a
> > payment of $3,028,700. Anderson's check covered
> > separate pensions he received from Northwest: the
> > regular pension plan, his excess pension plan and
> > supplemental executive retirement plan, or SERP.
> > top executives at Northwest, including current CEO
> > Doug Steenland, also were guaranteed three
> > Union workers at Northwest have a pension plan
> > on years of service. For mechanics, custodians and
> > cleaners—currently on strike against Northwest's
> > demands for the elimination of more than half
> > jobs and the replacement of traditional guaranteed
> > pensions with 401(k) plans—that amounts to $85 a
> > for every year they work. According to the
> > Mechanics Fraternal Association (AMFA), a mechanic
> > retires at 65, after 40 years at Northwest, will
> > collect about $40,000 a year.
> > The company's 2005 proxy statement indicated that
> > Steenland will receive $947,417 a year if he
> > at 65. Delta's "supplemental plan" adds
> multipliers to
> > boost the pensions of the company's four top
> > executives, crediting Steenland with 15 years of
> > service for every five he works and paying him
> > credits at twice the rate applied to regular
> > workers.
> > The company's four top executives—Steenland and
> > executive vice presidents Tim Griffin, Phillip
> > and Andrew Roberts—will receive a total of
> > in annual pension benefits. This is enough to fund
> > pensions of 90 flight attendants with comparable
> > of service.
> > In addition to their pension benefits, Northwest's
> > five executives (the above-mentioned, plus
> > Vice President and General Counsel Barry Simon)
> > taken in $32,000,721 in compensation since 2002,
> > including other perks such as lifetime health-care
> > coverage and travel benefits. The five also sold
> > than $1 million worth of stock in the months
> > up to the bankruptcy announcement, as did big
> > investors, like professional financier and former
> > Board of Directors member Al Checchi, who sold
> > 1,650,240 shares from April 23 to May 3, raking in
> > $8,439,884.
> > The New York Times reported Thursday that the
> > of Northwest's bankruptcy filing allowed the
> > to protect its assets while executives reneged on
> > payment of $65 million into the employee pension
> > which is already underfunded by $3.8 billion. If
> > Northwest skipped the payment before filing for
> > bankruptcy, it would have been in violation of
> > pension laws, and the government-run Pension
> > Guaranty Corporation (PBGC) could have placed a
> > on the airline's assets, giving itself a better
> > of recovering some of the money.
> > Instead, the newspaper noted, "[S]ince Northwest
> > for bankruptcy first, then skipped the pension
> > contribution, the government has no legal power to
> > place a lien on its assets. It makes the pension
> > guarantor—and the employees and retirees whose
> > interests the government represents—into unsecured
> > creditors for the $65 million. Unsecured creditors
> > generally fare poorly in bankruptcy, recovering
> > pennies for every dollar they are owed."
> > If the PBGC takes over Northwest's pension plans
> > pilots would suffer the loss of half or more of
> > pensions because the PBGC caps payments at $45,613
> > year for plans canceled in 2005. Other unionized
> > workers could also see drastic reductions.
> > Northwest also wants to freeze its current defined
> > benefit pension plans and switch to defined
> > contribution plans, such as 401(k)s, which are
> > for employers but don't provide workers the
> > benefits of traditional pensions.
> > Delta's pension funds are in even worse shape. If
> > company defaults on its obligations it would set a
> > record, surpassing the size of the United Airlines
> > pension collapse earlier this year, and further
> > staggering the overburdened pension guarantee
> > According to board officials, Delta's pension plan
> > promised benefits worth $17.5 billion, but it only
> > $6.9 billion in assets. With its bankruptcy filing
> > company is expected to press for even more drastic
> > cuts than it outlined in its corporate
> > plan last year, when it announced plans to cut $5
> > billion and 7,000 jobs by next year.
> > The looting of airline workers' pension funds is
> > one example of how the assets of the major
> > have been squandered over the last several decades
> > enrich the airline bosses and big investors. It
> > underscores the widespread parasitism that
> > the boardrooms of corporate America.
> > The top personnel of the airline industry are
> > chosen—and highly compensated—not because of their
> > ability to manage complex organizations or to lay
> > a long-term corporate strategy. Instead a definite
> > social type has risen to the top, whose only
> > qualifications are its acuity for slashing tens of
> > thousands of jobs and guaranteeing the quickest
> > largest payoffs to Wall Street.
> > Northwest's CEO Steenland began his career working
> > the Office of General Counsel for the secretary of
> > Department of Transportation when the Democratic
> > administration of President Jimmy Carter was
> > the deregulation of the airline industry. He later
> > joined a top law firm in Washington DC, which
> > represented Pan American Air Lines during the
> > frenzy that preceded the company's bankruptcy
> > declaration, and later represented an investor
> > that organized the leveraged buyout of Northwest
> > Airlines in 1989.
> > Steenland is particular adept at working the halls
> > Congress to lift regulations on pension funding
> > any other restrictions on profit-making, and at
> > use of the services of the labor bureaucracy to
> > labor costs. "Since the biggest input is the
> > salaries, and benefits line, this puts a lot of
> > attention on working with our employees in knowing
> > what we need to do to survive in the long term,"
> > commented.
> > Last year, in the midst of concession talks with
> > pilots union, Steenland hired Barry Simon as the
> > company's executive vice president and general
> > counsel. Simon was a top executive in the Seabury
> > Group, a New York consulting firm whose
> > "restructuring" clients have included Air Canada,
> > Airways, America West Airlines and Continental.
> > Simon earned his credentials as an executive at
> > Continental and Eastern airlines, where he served
> > under corporate raider and union-buster Frank
> > In 1983 Continental filed for bankruptcy—despite
> > airline's $60 million in cash reserves—in order to
> > exploit a provision in the Bankruptcy Code
> > Lorenzo to abrogate his contracts with the unions.
> > Simon directed Continental's legal strategy when
> > emerged from bankruptcy a second time in 1991.
> > Simon also played a leading role in the bankruptcy
> > Eastern Airlines, which stopped flying in 1991
> > following the bitter strike by unionized
> mechanics. At
> > the time, Lorenzo and his team stripped the
> airline of
> > valuable assets and sold them at fire-sale prices
> > Continental.
> > The 1980s and 1990s saw the emergence of junk-bond
> > dealers and corporate raiders in the airline
> > like Lorenzo and Carl Icahn (who bankrupted Trans
> > World Airlines, among others, and who is now worth
> > $5.8 billion—no. 55 on the list of the world's
> > people).
> > Today, after nearly a quarter of a century of
> > betrayals by the trade union bureaucracy (from the
> > striking air traffic controllers in 1981 to the
> > present scabbing organized by the airline unions
> > against the striking Northwest mechanics), the
> > corporate executives running the airlines feel
> > less restraint than their predecessors did when
> > slashing workers' jobs, wages and benefits and
> > company assets to enrich themselves.
> > Copyright 1998-2005
> > World Socialist Web Site
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