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Delta pumps additional $2 billion into pension plan, reduces future expected contributions

Delta curbside

Delta Air Lines Inc., Atlanta, contributed a total of $3.2 billion to its defined benefit plans in March and April, the company disclosed in an 8-K filing with the Securities and Exchange Commission on Wednesday.

The contribution, well above the $1.2 billion the company had announced in its 10-K filing on Feb. 13 that it intended to contribute to the plans in 2017, comes as the result of $2 billion in unsecured, investment-grade debt the company issued during the first quarter at a blended rate of just less than 3.3%.

In March, Delta contributed $2.6 billion, which included $1.5 billion from the debt proceeds, and in April contributed an additional $600 million, which included the remainder of the debt proceeds. The company said in the filing those complete the expected pension contribution for the year.

Also, Delta announced because of the large contribution, it has reduced its expected annual contribution for the years 2018-2020 to $500 million from $1.2 billion. The airline had announced in May 2014 its intention to contribute at least $1 billion per year to the plans to reach an 80% funding ratio by 2020.

As of Dec. 31, plan assets totaled $10.3 billion and projected benefit obligations totaled $20.8 billion, for a funding ratio of 49.4%, according to the February 10-K filing.

The plan's target allocation is 40% to 50% growth-seeking assets, which includes equities; 25% to 30% risk-diversifying assets, which includes alternatives; and 20% to 30% income-generating assets, which includes fixed income, according to the 10-K filing. An actual allocation was not provided.