Delta Air Lines and NWA will file its petition for chapter 11 today.
the new york times
Northwest and Delta Are Said to Be Preparing for Bankruptcy
By MICHELINE MAYNARD
Published: September 13, 2005
Northwest Airlines and Delta Air Lines are both preparing to seek bankruptcy protection as soon as Wednesday, people close to both companies said today.
Northwest and Delta are each finishing the details of their bankruptcy cases, including the financing that they will require to operate under bankruptcy protection, these people said. That could cause delays, but the fundamental work of preparing each bankruptcy case is complete, they said.
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A spokesman for Northwest, the nation's fifth-biggest airline, said today that the company had made no decision on a Chapter 11 filing. Likewise, a spokeswoman for Delta, which is the third-biggest carrier, said no decision had been made.
Both airlines would file for Chapter 11 protection in United States Bankruptcy Court in New York. Their cases would be assigned to different judges, however. If the filings are made on Wednesday, the first hearings would be on Thursday.
If Northwest and Delta both file, that would mean four of the industry's seven biggest airlines were operating under bankruptcy protection, reflecting the deep competitive issues that have battered the airlines since the year 2000.
United, which is the second-biggest airline behind American, has been operating under Chapter 11 protection since December 2002. Last week, it submitted a reorganization plan and said it hoped to emerge from court protection early next year.
Meanwhile, US Airways, which sought bankruptcy protection last year for the second time in two years, expects to emerge from court protection this fall, when it plans to merge with America West. Those airlines will operate under the US Airways name.
That would leave American, the industry's biggest carrier, Continental, the fourth largest, and Southwest, the sixth largest, as the major airlines operating outside bankruptcy protection.
While a bankruptcy filing by Delta had been expected to come this week, a filing by Northwest had been thought to be several weeks away.
But Northwest and all the large domestic airlines have been hit hard by the spike in jet fuel prices in the aftermath of Hurricane Katrina, which interrupted production at refineries on the gulf coast.
Even before the storm, however, airlines were already paying about 50 percent more for jet fuel this year than in 2004.
Neither Northwest nor Delta have hedging contracts that would have allowed them to lock in the price of fuel, meaning they must immediately cover price increases in cash whenever they occur.
Given that, and with its cash draining away in recent weeks, Northwest officials apparently decided to file quickly rather than wait any longer, people briefed on the airline's strategy said today.
Northwest's court filing would coincide with a strike by its mechanics union, which began Aug. 20.
The airline has remained in operation using supervisors, contractors and 1,200 replacement workers as substitutes for striking members of the Aircraft Mechanics Fraternal Association.
Workers struck the airline over its demand for $176 million in wage and benefit cuts, part of $1.1 billion in concessions that it is seeking from its unions.
Over the weekend, however, Northwest increased its demand to $203 million and said it now would need $1.4 billion in total cuts. And the airline said it could offer only about 1,080 jobs to the mechanics union, which represented 4,430 mechanics, cleaners and other workers at the airline before the strike.
The mechanics union walked away from bargaining, saying the airline's demands were too severe. The airline said it planned to give permanent jobs to some of the replacement workers starting today.
Once companies seek bankruptcy protection, they can ask a bankruptcy court judge to set aside contracts and impose lower terms, unless agreements can be reached. Northwest is likely to seek the same $1.4 billion in cuts once its bankruptcy proceedings begin, the people briefed on the airline's strategy said today.
Northwest, based in Eagan, Minn., has major hubs in Minneapolis, Detroit and Memphis and is one of the biggest domestic carriers operating international routes.
It is one of only two airlines with extensive routes throughout Asia. The other is United. Northwest operates in a code-sharing agreement with KLM, the Dutch airline, and it also shares flight designations with Delta and Continental.
Meanwhile, Delta asked its pilots union on Monday for a second round of wage and benefit cuts, on top of $1 billion in cuts granted last year, when the airline was close to a bankruptcy filing.
Neither Delta nor the Air Line Pilots Association specified how much the airline was seeking. The pilots union said its leaders would decide next Monday whether to negotiate with the airline. By then, however, Delta may already have sought bankruptcy protection, and it could ask a judge to impose the cuts it requested Monday from the pilots
the new york times
Northwest and Delta Are Said to Be Preparing for Bankruptcy
By MICHELINE MAYNARD
Published: September 13, 2005
Northwest Airlines and Delta Air Lines are both preparing to seek bankruptcy protection as soon as Wednesday, people close to both companies said today.
Northwest and Delta are each finishing the details of their bankruptcy cases, including the financing that they will require to operate under bankruptcy protection, these people said. That could cause delays, but the fundamental work of preparing each bankruptcy case is complete, they said.
Skip to next paragraph
A spokesman for Northwest, the nation's fifth-biggest airline, said today that the company had made no decision on a Chapter 11 filing. Likewise, a spokeswoman for Delta, which is the third-biggest carrier, said no decision had been made.
Both airlines would file for Chapter 11 protection in United States Bankruptcy Court in New York. Their cases would be assigned to different judges, however. If the filings are made on Wednesday, the first hearings would be on Thursday.
If Northwest and Delta both file, that would mean four of the industry's seven biggest airlines were operating under bankruptcy protection, reflecting the deep competitive issues that have battered the airlines since the year 2000.
United, which is the second-biggest airline behind American, has been operating under Chapter 11 protection since December 2002. Last week, it submitted a reorganization plan and said it hoped to emerge from court protection early next year.
Meanwhile, US Airways, which sought bankruptcy protection last year for the second time in two years, expects to emerge from court protection this fall, when it plans to merge with America West. Those airlines will operate under the US Airways name.
That would leave American, the industry's biggest carrier, Continental, the fourth largest, and Southwest, the sixth largest, as the major airlines operating outside bankruptcy protection.
While a bankruptcy filing by Delta had been expected to come this week, a filing by Northwest had been thought to be several weeks away.
But Northwest and all the large domestic airlines have been hit hard by the spike in jet fuel prices in the aftermath of Hurricane Katrina, which interrupted production at refineries on the gulf coast.
Even before the storm, however, airlines were already paying about 50 percent more for jet fuel this year than in 2004.
Neither Northwest nor Delta have hedging contracts that would have allowed them to lock in the price of fuel, meaning they must immediately cover price increases in cash whenever they occur.
Given that, and with its cash draining away in recent weeks, Northwest officials apparently decided to file quickly rather than wait any longer, people briefed on the airline's strategy said today.
Northwest's court filing would coincide with a strike by its mechanics union, which began Aug. 20.
The airline has remained in operation using supervisors, contractors and 1,200 replacement workers as substitutes for striking members of the Aircraft Mechanics Fraternal Association.
Workers struck the airline over its demand for $176 million in wage and benefit cuts, part of $1.1 billion in concessions that it is seeking from its unions.
Over the weekend, however, Northwest increased its demand to $203 million and said it now would need $1.4 billion in total cuts. And the airline said it could offer only about 1,080 jobs to the mechanics union, which represented 4,430 mechanics, cleaners and other workers at the airline before the strike.
The mechanics union walked away from bargaining, saying the airline's demands were too severe. The airline said it planned to give permanent jobs to some of the replacement workers starting today.
Once companies seek bankruptcy protection, they can ask a bankruptcy court judge to set aside contracts and impose lower terms, unless agreements can be reached. Northwest is likely to seek the same $1.4 billion in cuts once its bankruptcy proceedings begin, the people briefed on the airline's strategy said today.
Northwest, based in Eagan, Minn., has major hubs in Minneapolis, Detroit and Memphis and is one of the biggest domestic carriers operating international routes.
It is one of only two airlines with extensive routes throughout Asia. The other is United. Northwest operates in a code-sharing agreement with KLM, the Dutch airline, and it also shares flight designations with Delta and Continental.
Meanwhile, Delta asked its pilots union on Monday for a second round of wage and benefit cuts, on top of $1 billion in cuts granted last year, when the airline was close to a bankruptcy filing.
Neither Delta nor the Air Line Pilots Association specified how much the airline was seeking. The pilots union said its leaders would decide next Monday whether to negotiate with the airline. By then, however, Delta may already have sought bankruptcy protection, and it could ask a judge to impose the cuts it requested Monday from the pilots
