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Northwest meets Wed on bankruptcy: Pilots

September 14, 2005

CHICAGO (Reuters) – The board of Northwest Airlines will
meet on Wednesday to decide whether the company will file for
bankruptcy protection, the airline’s pilots association said on
Tuesday evening.

The scheduled board meeting will follow a more than 50
percent plunge in Northwest’s stock to an all-time low on
bankruptcy fears on Tuesday, after the company missed several
payments and a newspaper report said both Northwest and Delta
Air Lines might file for Chapter 11 as early as Wednesday.

At the meeting, Northwest’s board will “decide whether or
not (Northwest) will continue its attempt to restructure
outside of the bankruptcy process or file for Chapter 11
bankruptcy protection,” the Northwest Airlines Air Line Pilots
Association said in a posting on its Web site.

Earlier in the day, The New York Times, citing anonymous
sources, said both Northwest, the No. 4 U.S. carrier, and No. 3
Delta were very close to filing for federal protection from
creditors.

“The shares are down obviously on the New York Times
article. That’s the only news that came out before the stock
began to fall,” said Helane Becker, analyst at Benchmark Cos.

A Northwest spokesman said the company has made no decision
regarding a Chapter 11 filing. A Delta spokeswoman said that
bankruptcy is a possibility for the carrier but she made no
comment on the timing of such a filing.

The bankruptcy fears came the same day as Mesaba Aviation
Inc., a regional feeder carrier for Northwest, said Northwest
defaulted on an $18.7 million payment due on Monday.

Shares of Northwest ended down 52.6 percent at $1.57 on
Tuesday on Nasdaq. The shares had dipped as low as $1.26
earlier in the session. In the past year, the shares have
traded as high as $11.83.

Delta shares, which had lost more than 22 percent on
Monday, fell 7 cents, or another 8.2 percent, to 78 cents.

The Times report said both Northwest and Delta were putting
the finishing touches on their bankruptcy cases and that both
are prepared to file in the United States Bankruptcy Court in
New York.

Northwest also said late Tuesday that it failed to make $23
million in payments for equipment leases that were due on
September 10, 11 and 12. It also said it was due to make a $65
million payment to the company’s pension fund on Thursday.

If the company fails to make the payment and is not in
Chapter 11, a lien against certain assets would arise.

At the same time, the company announced that V.A.
Ravindran, a member of the company’s board since 1992, had
resigned. The company’s spokeswoman would not elaborate any
further on either announcement.

SURPRISES

S&P analyst Jim Corridore said he was surprised to read
that Northwest was considering filing for Chapter 11 so soon.

“I didn’t think that bankruptcy was imminent for Northwest.
I had felt they had enough cash to stay out of bankruptcy a
little longer,” he said.

Corridore and Becker said they thought it was possible,
however, that Northwest could file before October 17, when a
new bankruptcy law makes it tougher and more expensive to go
bankrupt.

The airline industry has been battered by soaring fuel
costs and low-fare competition. UAL Corp.’s United Airlines and
US Airways Group Inc. both are nearing the end of their own
periods operating under Chapter 11.

Also on Tuesday, Northwest began hiring replacements for
striking workers, but the union representing the employees said
the No. 4 U.S. carrier could not function properly without the
strikers’ expertise.

Northwest has said the strike by the 4,400 members of the
Aircraft Mechanics Fraternal Association, or AMFA, has caused
no significant service disruptions. The airline said it would
welcome back any workers who wish to cross the picket line.

AMFA members began the strike on August 20 after the two
parties failed to reach a deal on a labor contract that would
save Northwest $176 million a year. The carrier has continued
to fly using replacement workers and outside vendors.

AMFA has said Northwest was suffering from the strike and
that the workload would overwhelm the replacement mechanics who
are less familiar with Northwest’s fleet.

Negotiations resumed last week but broke off again on
Sunday. The union said Northwest has raised its demands for
concessions to $203 million annually and proposed cutting 75
percent of its members from the payroll.

Northwest has confirmed that it now was seeking the higher
amount from the mechanics.

Northwest had said it needs $1.1 billion in annual labor
cost savings to restructure and avert bankruptcy, but that it
may need to raise its savings target to offset rising fuel
prices.




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