Pension Bill Prompts Capitol Hill Fight Among Airlines Thursday September 29, 2:46 PM EDT WASHINGTON -(Dow Jones)- A nasty fight has sprung up on Capitol Hill among the nation's older airlines over which of them should get a break on federally required pension payments. "It's a food fight that's become a knife fight and it's verging on a gun fight," said one Senate Republican leadership aide, who agreed to speak only on the condition of anonymity. While others are involved, the lead combatants are Northwest Airlines Corp. (NWAC) ( NWAC) and Continental Airlines Inc. (CAL) (CAL). Northwest wants more time to pay off its pension debts; it has teamed up with Delta Air Lines Inc. (DAL) (DAL) to push for the relief. Continental - whose pension plan also is underfunded - has asked for an exemption from proposed new rules barring lump-sum payouts to retirees covered by underfunded plans, according to lobbyists and congressional aides familiar with the dispute. Each of the airlines could get what it wants. But congressional aides say the carriers are pushing their own plans and criticizing those of their competitors. "People are engaging in business competition through the Congress," the Senate aide said. The airlines hope the provisions will be added to a broader pension reform bill that would, generally speaking, impose tougher new pension-funding standards while requiring companies to pay higher premiums to the Pension Benefit Guaranty Corp. Continental didn't return repeated requests for comment. Information about Continental's stance in the debate was obtained from industry experts, lobbyists and Capitol Hill staff. The stakes are huge. Pension plans at Northwest and Delta are underfunded by $5.7 billion and $10.6 billion, respectively, the Pension Benefit Guaranty Corporation announced after the two airlines sought bankruptcy protection earlier this month. Pension payments due in 2006 and 2007 under current rules will total $2.5 billion for Northwest and $1.55 billion for Delta, the airlines say. Continental's pension plans are estimated to be underfunded by less than $2 billion, yet there's a catch. Because almost all its workers can demand their pension in a lump-sum payment, the airline estimates it will have to make $1.5 billion in pension contributions over the next five years. Despite the daunting figures, all three airlines say they want to keep trying to refill their pension coffers. But Northwest and Delta say they can't afford to make the steep payments required by law, and they've asked Congress to let them amortize their underfunding over 25 years. In a deal reached Tuesday, two Senate committees agreed instead to give the airlines 14 years to amortize their underfunding. They would also be exempt from tougher standards about what assumptions they could make about the rate of return on assets in their pension funds. Instead, the companies could use interest rate assumptions developed by their own actuaries. But at least a week before the deal was reached, rival Continental had been sending around Capitol Hill an analysis critical of the plan. The analysis showed that the 14-year proposal was generous enough that Northwest wouldn't have to make any pension payments for decades. The analysis came with the warning that "these results are very roughly estimated on very limited 10-K information," according to one industry lobbyist. "That's the only thing on the page that is accurate," fired back Northwest Airlines Senior Vice President Andrea Newman. The reference to 10-K is the annual public corporate filings with the Securities and Exchange Commission. Leery of making any forward-looking statements, Newman wouldn't say how Continental's numbers were wrong, but would say "Northwest anticipates making significant payments into our plans." She also criticized efforts to kill the Northwest-Delta provision. If Northwest dumps its pension on the PBGC, employees and retirees stand to lose $ 2.9 billion of $11.5 billion in promised benefits. "There is a dangerous game being played that ultimately hurts thousands of workers," Newman said. Email and letters on the issues have been ping-ponging across the Capitol for days, getting more sharply worded over time, according to aides who've watched the fight. Behind-the-scenes sniping between competitors is fairly common on Capitol Hill, "but this is like nothing I've ever seen before.... This is just a free for all," said the senior Senate Republican aide. The fight broke into the public this week when House Education Committee Chairman John Boehner, R-Ohio, cited the analysis in a speech Tuesday morning. Boehner has long worried that cutting the airlines a break will only allow their pensions to sink deeper into trouble. And on Tuesday, he said that the analyses he has seen shows that it would be irresponsible to allow the provision to become law. But Northwest, its lobbyist and Senate aides say the analysis is just plain wrong. "I have seen Continental's numbers and I have seen Northwest's books, and I know that is not the case," said the Senate GOP leadership aide. Using conservative assumptions, under the Senate bill Northwest could be required to contribute as much as $180 million a year, but is more likely to pay about $100 million annually, the Senate aides and one industry expert said. Richard Grafmeyer, an airline lobbyist with Capital Tax Partners, agreed the annual contribution wouldn't be a "huge number" compared with what otherwise would be owed. Still, Grafmeyer noted that Northwest's pension plans are now frozen to new beneficiaries and new benefits. That means that even if Northwest does abandon its pension sometime down the road, "for every dollar contributed to the plan, that is one less dollar the government will have to pay." But the damage has been done and now Northwest has began firing back, pointing out a provision Continental had secured in Boehner's pension reform bill this summer, according to industry sources and the Senate aide. That provision would allow Continental to continue making lump sum distributions to retirees. Both House and Senate pension bills would otherwise prohibit such distributions to avoid a run on an underfunded pension's scarce resources. Proponents note that such distributions could only be made by companies that had frozen their pension plans. They say many more companies than just Continental would benefit. But Northwest, because it froze its pension plans after the June 29 cut-off date, will be excluded. In any case, aides and the industry expert say the fight may leave all involved worse off. The industry expert said the fight is typical of the airline industry, where rather than banding together airlines "eat their own." And the Senate aides said that the worse the fight gets the more turned-off lawmakers get at the prospect of helping any of them. "They are doing some long-term damage to their standing on the Hill," said the Senate leadership aide. "One thing (senators) can't stand is when they feel they have been misled." -By John Godfrey, Dow Jones Newswires; 202-862-6601; John.Godfrey@xxxxxxxxxxxx (END) Dow Jones Newswires 09-29-05 1446ET Roger EWROPS