The big airlines are lobbying harder than ever to get aviation-specific pension reform this year and widening the gulf between Congress and the White House on the issue.

Instead of focusing on airlines, the Bush administration wants to secure broad pension reform that would resolve the $23 billion shortfall at the government’s pension-insurance fund, the Pension Benefit Guaranty Corp. (PBGC).

Sen. Trent Lott (R-Miss.), one of the airline industry’s staunchest allies, was tight-lipped but evidently frustrated when he left a Finance Committee hearing on pension defaults Tuesday that spent little time on the subject of airlines.

Lott has repeatedly criticized the administration’s plan to increase companies’ monthly pension premiums by more than half, believing that might save the corporation but doom the airlines.

Sen. Johnny Isakson (R-Ga), sponsor of the airlines’ favorite pension proposal thus far, made that fear plain. “Comprehensive pension reform would be wonderful, if we could accomplish it this year,” he said, but added, “The aviation industry doesn’t have the luxury of time. If it’s not this year, it’s not going to matter.”

Isakson’s bid to allow the airlines a funding freeze for their defined-benefit pension plans has attracted some tentative support on the committee. But Isakson, without explanation, left the hearing early to discuss pension changes at the Health Education, Labor and Pensions Committee, which has no jurisdiction over his bill.

Lott’s simmering dissatisfaction came to a boil before the Memorial Day recess. At a subcommittee hearing, he said he wants Senate leaders to bring pension relief to the floor. “If they don’t, I’m going to offer it as an amendment in June or July,” he told aviation officials at the hearing. “That would set up a way for the pension issue to be dealt with appropriately.”

The Congressional Budget Office estimates that airlines and steel account for 70 percent of claims on the Pension Benefit Guaranty Corp., which absorbs the pension obligations of companies whose dire finances prevent them from paying employee retirement benefits. The corporation’s single-employer pension budget has gone from a $9.7 billion surplus to a $23.3 billion deficit in less than four years.

Bradley Belt, executive director of the corporation, continued to promote the White House premium-increase plan as a tool for better informing the public about the financial solvency of pensions.

“I’m ever hopeful that Congress will recognize the wisdom of the administration’s approach,” Belt said. He said that the agency’s highest priority would be to strengthen pension funding requirements and that the Isakson bill would have the opposite effect.

Delta lobbyist Donald Scott Yohe and his team “are very supportive of the Isakson bill,” an airline spokeswoman said. “Northwest is kind of in the same boat, so they’ve taken up this cause also. American and Continental have also been looking at it.”

Now that US Airways and United Airlines have unloaded a combined $9.6 billion in pension bills onto the insurance fund, other airlines are moving to quash speculation that they will be the next pleading in bankruptcy court for a taxpayer bailout. “We support the legislation” submitted by Isakson and Sen. John Rockefeller (D-W.Va.), “but it won’t do us any good,” said Will Ris, senior vice president for government affairs at American Airlines.

“We don’t want to unload anything on the PBGC,” he added. “We just want to have the rules written so we’re able to become fully funded.”
The airlines’ legislative wish list on pensions is short: a lower interest rate applied to companies trying to fund pensions fully and a longer period of amortization during which to pay back pension liabilities.

 Isakson’s bill would set amortization at 25 years, 18 more than in the White House’s proposal.

Isakson said the stark differences between his bill and the administration’s plan did not mean lawmakers were forced to choose one or the other solution.

“Aviation reform specifically would hold the line long enough to keep the PBGC in business,” Isakson said.

His co-sponsor was less welcoming.

“I’m very concerned that in an effort to shore up the PBGC, the administration’s proposals are doing more harm than they are good,” Rockefeller told the Finance Committee. He said the White House premium increase would drive airlines and other companies away from defined-benefit pension plans and toward defined-contribution plans such as 401(k)s.

Defined-contribution is now the norm at US Airways, which is staying mum on any pension-system changes. A spokesman for the airline declined to comment on whether US Airways would welcome a pension funding break for its competitors.

The ERISA Industry Committee, representing the benefit interests of employers across many industries, is yet another player on the scene for the pension debate. ERISA spent $260,000 on lobbying in 2004, according to disclosure forms, and its pension plan is to dampen claims of crisis at the insurance fund.

“The idea that the PBGC is going to collapse and there’s been a taxpayer bailout is overdramatic to say the least,” said Janice Gregory, senior vice president and lobbyist for ERISA. While the agency’s benefit payments topped $3 billion last year, she said, its total income topped that number.

ERISA is devoting more resources to fight the White House premium increases than to promote an airline exemption, but “we don’t disadvocate it either,” Gregory said. “You have to figure out what’s most likely to keep companies afloat.”

Rep. John Boehner (R-Ohio) is planning to introduce a broad pension-reform bill as early as this week. But that doesn’t mean Lott’s and the airlines’ cries for attention will go unheard, Gregory said. Aviation-specific change is “going to come up as the legislation moves through the process, whether it comes up as an amendment in that committee or in later consideration.”