IXLR8

No way....

Pineapple Guy

ACL,

Your info has generally appeared to be very accurate. This statement, however, is not. If their plan took a 10% YoY reduction, as compared with the expected 8.85% gain, the effect will be a heck of a lot more than $3-4m.

PG

Carl Spackler

You have no idea how much I wish that were true. We all want the pension voluntarily terminated and the money moved into an annuity in each of our own names. But the law gives us two problems here. First is that you cannot voluntarily terminate your own pension unless it is 100% funded. So my suggestion was to raise the retirement age for NWA pilots in order to make the pension 100% funded. I understand that just raising it to 62.5 years would immediately change the actuarial data and make the pension fully funded. But then comes the second problem. It is illegal to make a change to your current pension fund rules outside of another pension termination request in bankruptcy court. How's that for an unbelievable stupid law. I believe that a majority (in the 90%+ range) would jump at the chance to annuitize the pension as is, and remove any more funding by the new Delta forever, but the law allows only a termination or leaving it exactly as is.

Sigh.

Carl

Carl Spackler

Because GAAP (Generally Accepted Accounting Practices) rules don't allow the use of pension over or underfunding in the determination of consolidated earnings. Pension over or underfunding is accounting for in balance sheet data and the company's net worth/stockholder equity.

And by the way NWA has a market cap that is very close to DAL even though NWA is 2/3 the size of Delta. This in spite of the fact that NWA has an underfunded pension plan hurting its net worth. A hurt that Delta does not have. It really says a lot for the value of the company DAL will be merging with.

At this time where credit is unavailable and cash is king, that would be a poor use of cash. The law allows a company to spread out the underfunding liability over a 17 year period. It would be nuts to spend your cash on this now.

Because the new legislation allows you to amortize (spread out) your underfunding of a pension over 17 years. Given the current level of underfunding and the money put into the pension so far this year, there is no more funding needs for this year.

Carl

Carl Spackler

You're right on this ACL. I've been trying to find the exact number and post the reference, but I can't find it now. My memory recalls the number at 5 to 6 million per year.

Carl

Carl Spackler

You're wrong on this Pineapple. The 10% number and the 8.85% number are unsupportable.

Carl

Pineapple Guy

Wanna bet?

PG

acl65pilot

Funding for the Plan is mostly unchanged. The number of funds under the Plan was reduced from 20, to 14 as part of the freeze. Only 1 of the funds trades equities. It is getting hammered...*BUT*...the Assumption Rate was changed (by law) to the 30-year T-Bill rate. That means the assumed growth rate was indexed low enough that 90% funding (last time I checked) is actually _more_ cash than 90% of the old method.

It _will_ chnge the amount that Delta needs to pay into the Plan as part of the Pension Protection Act deal...but we're talking maybe $21-million next year instead of $18-million

Verbatim on what I was told.
If he is wrong then this is wrong, but I checked and what he states appears to be correct.
The only way that Pineapple is correct is if lots of you retire pre 62.5 and start drawing, which by the way could happen.

Carl Spackler

Yes. If you post a reference for your 10% and 8.85% number, I'll send you a nice Pineapple upside down cake.

Carl

Pineapple Guy

Actually, Carl, that says more about DAL than NWA. Since the merger has been announced, NWA simply trades as a proxy to DAL shares, discounted in consideration that the merger may not occur. Considering the conversion ratio is 25% over DAL price, but NWA is only trading at 18.5% above, shows that absent the merger, NWA shares would trade lower. That is in no small part due to the realization that NWA would have a more challenging time funding their pensions as a stand alone.

The reference for the 10% loss is the fact that the S&P and DOW are both down about 35% YTD, and even if the NWA pension is only 50% invested in stocks, its likely down that much so far this year. As for the 8.85% assumed rate of return, here's a cut from the Pension Protection Act.

"Section 402. Special funding rules for plans maintained by commercial airlines that are amended to cease future benefit accruals.
The proposal includes relief for the airlines. Airlines can choose to amortize over 10 years rather than 7 years. Alternatively, for plans that freeze accruals they can use a 17-year amortization and an 8.85% amortization interest rate."

I'll take that cake now, thank you very much.

PG