The US Senate passed legislation late Thursday that significantly reforms US pension law and gives struggling airlines needed extra time to fund defined retirement programs.

The bill, identical to one passed by the House in late July, moves to the desk of President Bush, who is expected to sign it into law. Bankrupt Northwest Airlines, a major beneficiary of the legislation, said the new law "will save the pension benefits of 73,000 current and former Northwest employees."

The bill gives all US companies seven years from 2008 to fully fund pension programs. But airlines that have frozen their plans, such as NWA and Delta Air Lines, get 10 additional years (17 overall) to fund their plans fully. Other carriers get three additional years, or 10 overall, to complete funding. That led some lawmakers, particularly those representing Texas--home state of American Airlines and Continental Airlines--to complain that Northwest and Delta were being rewarded for mismanagement while AA, CO and other carriers not in bankruptcy were penalized.

But since the House was already in summer recess, even a slight change to the legislation by the Senate would have stalled it until fall. So senators agreed to pass it in its current form, voting 93-5 to change a frayed system that has left federal pension insurer Pension Benefit Guaranty Corp. in deficit by an estimated $23 billion. Lawmakers left open the possibility of drafting future legislation that could revamp the system further and perhaps give nonbankrupt airlines more time to fund plans.

"While the bill...goes a good deal of the way to solving the problems faced by American in maintaining its defined benefit pension plans, it has created far more favorable rules for airlines that have frozen their pension plans," AA said in a statement. It added that it was "pleased" that many lawmakers appear willing to address "the disparity in treatment among airlines" in the future.

NWA gave unequivocal support to the bill. "With employees making the difficult decision and sacrifice to freeze their pension plans, all of us looked to Congress for the additional time required to save our plans," Senior VP-Government Affairs Andrea Fischer Newman said. President and CEO Doug Steenland called the bill's passage "an important victory for our employees and a key milestone in the restructuring of our company."