More on Delta and Northwest

The three Delta plans, which cover about 106,000 people, have $6.9 billion in assets and $17.5 billion in liabilities, according to PBGC estimates. Based on preliminary estimates, the PBGC says it would have to guarantee $8.4 billion of the $10.6 billion benefits funding shortfall. The PBGC itself has a $23.3 billion deficit. If those estimates hold up, a PBGC termination of Delta's plans would exceed the $6.6 billion loss (by far its largest) absorbed through its takeover of United Airlines' pension plans.

This is slightly misleading for a couple of reasons. First, use of the word "deficit" makes it sound like that's an annual shortfall in revenues against outflows, which is not correct. The $23.3 billion figure is the sum total of the PBGC's unfunded liabilities. Further, the PBGC includes in its estimates of its liabilities an allowance for "probable" plan terminations. So some portion of the Delta shortfall is already reflected in that $23.3 billion unfunded liability.

Additionally, the PBGC also would be hit with a huge loss if Northwest Airlines, which also filed for bankruptcy on Wednesday, terminates its pension plans. The three Northwest plans, have $5.8 billion in assets and liabilities of $11.5 billion, according to PBGC preliminary estimates. Of the $5.7 billion funding shortfall, the PBGC estimates it would be liable for $2.8 billion.

Source: Business Insurance