Delta, Northwest Eyed As Bankruptcy Hovers
After years of losses and soaring fuel costs driven even higher by Hurricane Katrina, two of the nation’s biggest carriers, Delta and Northwest, may be headed to bankruptcy court.
Shares of Delta Air Lines Inc. fell Wednesday amid expectations the carrier could file for bankruptcy after the market closed. Northwest Airlines Corp. shares, meanwhile, rose as the carrier’s board was set to meet to decide on a Chapter 11 filing.
An industry consultant briefed by Delta on its plans told The Associated Press on Monday that the nation’s third-largest airline planned a bankruptcy filing late Wednesday. The board of directors would have to approve such an action.
Northwest’s board was scheduled to meet Wednesday to decide on a Chapter 11 filing, said Will Holman, a spokesman for the Air Line Pilots Association union, which has a member on the board.
If both airlines filed for bankruptcy, four of the nation’s biggest carriers would be in Chapter 11. Elk Grove Village, Ill.-based UAL Corp.’s United Airlines is in Chapter 11 and Arlington, Va.-based US Airways Group Inc. is there for the second time in three years.
Delta shares fell 8 cents, or 10.3 percent, to 70 cents in morning trading Wednesday on the New York Stock Exchange. Northwest shares rose 16 cents, or 10.2 percent, to $1.73 on the Nasdaq Stock Market.
On Tuesday, Northwest said it had decided not to make $42 million in required debt payments last weekend.
Besides the $42 million in cash it chose to conserve this week, Eagan, Minn.-based Northwest said it faces a Thursday deadline to make a $65 million pension contribution or risk having a claim made against its assets, according to a filing with the Securities and Exchange Commission.
Northwest spokesman Kurt Ebenhoch would say only that the No. 4 U.S. carrier “has made no decision” on a bankruptcy filing.
Airlines worldwide have been stung by surging costs for jet fuel in recent months, with the largest percentage increases coming in the last two weeks after Hurricane Katrina’s assault on Gulf Coast refineries. Northwest and Delta have also been hobbled by high cost structures that leave them vulnerable when lower-cost competitors like Southwest Airlines Inc. and JetBlue Airways Corp. force them to match below-cost ticket prices.
Northwest, whose mechanics have been on strike since Aug. 20, raised its $1.1 billion target for annual labor cost savings to a new, undisclosed figure, as rising fuel prices have battered the airline.
The delayed payments included $19 million owed to Northwest regional partner Mesaba Aviation Inc., which gets its aircraft and schedule from Northwest and operates under the Northwest Airlink brand. A filing by Mesaba parent MAIR Holdings, Inc. said Northwest has until Sept. 20 to make the payment or “Mesaba may exercise available remedies against Northwest.”
Northwest said it missed other payments totaling $23 million related to aircraft financing that were due Saturday through Monday. It said the terms of those agreements give it grace periods of five to 10 business days before the payments are in default.
Northwest said it has not yet decided whether to make the payments before the deadlines. Northwest also said it began hiring permanent replacements for the mechanics on Tuesday.
Hurricane Katrina hit Delta hard because of the airline’s presence in the South. It had canceled commercial flights to New Orleans and Gulfport, Miss., since the hurricane hit Aug. 29, but recently announced the resumption of service to those airports.
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AP Business Writer Joshua Freed in Minneapolis contributed to this report.