• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

NWA, AmEx Settle Lawsuit -- Bankrupt Airline Accused American Express of Withholding $63.4 Million in Ticket Payments

Posted on: Tuesday, 18 October 2005, 09:00 CDT

By Aleksandrs Rozens Associated Press

NEW YORK - Attorneys for Northwest Airlines Corp. told a New York bankruptcy judge on Friday they have reached an agreement with American Express Co. that may end a suit launched by the bankrupt airline against the financial services company.

"We have reached an agreement with American Express ... the agreement is being documented," an attorney for Northwest told New York bankruptcy Judge Allan L. Gropper.

The agreement's details likely will be made public in an upcoming hearing. The committee that represents different creditors has not yet been given the specifics of the agreement between Northwest Airlines and American Express.

Eagan, Minn.-based Northwest Airlines, the nation's fourth- largest carrier, filed for bankruptcy protection on Sept. 14. Company executives have said the airline was pushed into bankruptcy by skyrocketing fuel costs and competition from low-cost carriers.

Last Friday, Northwest said it was close to settling a lawsuit with American Express's travel services unit, which the airline claims has withheld payments worth about $63.4 million for tickets on its flights. Northwest lawyers said last Friday the dispute should be resolved by early this week.

Airline and credit card industries have become increasingly dependent on each other since the first frequent-flier card was introduced by Continental Airlines and Midland Marine bank in 1985.

Credit card issuers have come to rely on frequent-flier reward plans because they encourage spending and have become a big source of profit. According to David Robertson of the Nilson Report, which tracks the credit card industry, consumers with frequent-flier rewards cards spend 2.5 times more than other credit card holders.

"Because co-brand customers are so profitable and because the U.S. market is saturated, issuers don't want to lose the customers because they cannot be replaced," said Robertson.

Separately, Gropper said he would make public letters he has received from Northwest employees that address "broad" issues, among them severance and union contracts. "Nothing that comes to me should be considered private," he said.

"I am completely confident any employee (having sent a letter) will not be penalized," Gropper said.

Source: Commercial Appeal, The

More News in this Category