Delta forecasts increased pension obligation, decline in cash

By Kelly Yamanouchi

The Atlanta Journal-Constitution

Delta Air Lines said it expects its pension funding obligations to increase by $450 million next year, due to the decline in investment markets in 2008.

Atlanta-based Delta estimates its defined benefit pension funding for this year to total $200 million, according to a filing with the U.S. Securities & Exchange Commission. The company expects its third quarter pension expense to be $100 million to $125 million and third quarter pension funding to be $25 million. Delta terminated its pilot pension plan and its remaining plans are frozen.

Delta, which has had a relatively strong cash position in the airline industry, also said it expects to have $5 billion in total unrestricted liquidity at the end of the third quarter, and $4.6 billion at the end of the year.

Delta is reportedly in discussions about making an investment of several hundred million dollars in Japan Airlines as it seeks a Japanese partner.

Also in the filing on Monday, Delta said it expects $400 million in synergies in the first nine months of 2009 from its merger with Northwest Airlines.

Delta forecast a 3 percent to 4 percent operating margin for the third quarter and a break-even operating margin for the full year. A J.P. Morgan analyst report called it a “hoped-for nudge to guidance.”