Delta, I come in praise of your contributions

After the merger with Northwest Airlines in 2008, Delta Air Lines had $7.3 billion in defined benefit pension assets and $15.93 billion in liabilities (45.8% funding ratio). Lower discount rates made things worse with the funding ratio falling to 38.1% in 2012.

Delta shows any plan sponsor the path forward: contributions. Contributions averaged $1 billion a year from 2010 to 2021, including a $3.5 billion contribution in 2017, which represented 24.15% of the plan’s starting assets in 2017. Delta noted the large contribution in its 10-K.

“In the first half of 2017, we contributed $3.5 billion to our qualified defined benefit pension plans using net proceeds from a $2.0 billion debt issuance, shares of our common stock from treasury with a value of $350 million and existing cash. As a result of these contributions, we satisfied, on an accelerated basis, our 2017 required contributions for our defined benefit plans, including more than $3.0 billion above the minimum funding requirements.”

Delta did not stop there, “We have no minimum funding requirements in 2018. However, in January 2018, we voluntarily contributed approximately $500 million to these plans.”

In addition to the contributions well in excess of legal requirements, excellent investment returns in the past three years have resulted in a funding ratio of 92.55% at the end of 2021.

If one adjusts contributions to only $500 million per year, and holding all things else equal (including investment returns), the funding ratio would have increased to around 60%. Funding would have improved by around 15 percentage points from the middle of the decade, but it was the extra contributions that got Delta and, most importantly, its current and future plan beneficiaries to where the plan is today.

The most recent Corporate Balance Sheet special report can be found here.

Full a complete spreadsheet with 15-plus years of data, reach out to the P&I data team.