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U.S. airlines Delta, Northwest file for bankruptcy protection
September 14, 2005 5:59 PM EDT
ATLANTA - Delta Air Lines Inc., and Northwest Airlines Corp., hobbled by high fuel costs and heavy debt and pension obligations, filed for bankruptcy protection from creditors Wednesday, becoming the third and fourth major carriers to do so since the Sept. 2001 terrorist attacks.
Delta's late afternoon filing included its low-fare carrier Song and was followed shortly after by Northwest's filing.
Delta's total debt is roughly $28.3 billion (euro23 billion), and it listed $21.6 billion (euro17.5 billion) in assets, according to the filing. The asset figure would make Delta's bankruptcy the ninth-largest in U.S. history, according to bankruptcy tracker New Generation Research Inc. The ranking did not change following Delta's recent $425 million (euro345 million) sale of feeder carrier Atlantic Southeast Airlines to SkyWest Inc.
Delta and Northwest said passengers were not expected to see any immediate effects from the filing. Delta also promised to honor all tickets and sent a letter to frequent-flier customers seeking to reassure them. Northwest said it would continue to operate normally its frequent flyer and WorldPerks Visa programs.
"We are operating our full schedule of flights, honoring tickets and reservations as usual, and making normal refunds and exchanges," Gerald Grinstein, chief executive of Delta, said in the letter.
Filing for bankruptcy protection allows Delta to pursue wage cuts for its 65,000-plus full-time employees, as well as pension and health benefits for workers and retirees, that would have been more difficult or impossible without protected status.
While Delta was expected to continue its normal schedule, analysts say some changes to Delta's operations could occur as the company makes its way through bankruptcy court.
Atlanta-based Delta, the nation's third-largest carrier, has lost nearly $10 billion (euro8.1 billion) over the last four years despite announcing it would cut up to 24,000 jobs. In September 2004, it also said it would shed its Dallas hub as part of a sweeping turnaround plan aimed at saving the airline. It has since scaled back its operations in Dallas.
Delta said it is arranging roughly $2 billion (euro1.6 billion) in post-petition financing and already received a commitment for $1.7 billion (euro1.4 billion) in financing.
Northwest, the fourth-largest U.S.airline, had been in better financial shape than some of its competitors, with an extensive Asian network and cargo business both thought to be profitable. But that changed after 9-11, the rise in fuel prices and the epidemic of SARS, a virus that spread through several Asian countries, which cut into a core Northwest business.
Like other airlines, the Eagan, Minnesota-based Northwest has been hit by meteoric increases in jet fuel prices. But Northwest also has the highest labor costs in the industry and has been losing money at the rate of $4 million (euro3.3 million) a day.
"We had developed a plan to restructure Northwest outside of Chapter 11 and have been implementing that plan," Doug Steenland, Northwest president and CEO, said in a statement. "Unfortunately, in addition to an uncompetitive cost structure, our efforts have been overtaken by skyrocketing fuel costs."
Delta and Northwest follow into bankruptcy UAL Corp., the Elk Grove Village, Illinois-based parent of United Airlines, and Arlington, Virginia-based US Airways Group, Inc., which is undergoing reorganization for the second time in three years.
Fort Worth, Texas-based AMR Corp., the parent of American Airlines, the nation's biggest carrier, teetered on the verge of bankruptcy before winning deep concessions from its employees. The other so-called legacy carriers, those with a large presence in multiple regions prior to deregulation in 1978, are Eagan, Minnesota-based Northwest and Houston-based Continental Airlines Inc.
Continental and American are in no immediate danger of bankruptcy. Continental had a big cost advantage over other traditional airlines after it slashed expenses during two bankruptcy reorganizations in the 1990s. American may be the strongest financially of the traditional airlines, thanks to $1.8 billion (euro1.5 billion) in annual labor concessions it won in 2003. Its parent company actually turned a profit in the second quarter.
But even the stronger carriers are finding business harder with fuel prices soaring, carrying crude oil futures past $70 (euro57) a barrel earlier this month.
Some smaller carriers, including Honolulu-based Hawaiian Airlines and Indianapolis-based ATA Airlines Inc., also have filed for bankruptcy in recent years. Hawaiian emerged from bankruptcy in June.
The airline industry was devastated in the aftermath of the 2001 terror attacks, which prompted many people to cut back on air travel. The recession and slow economic recovery in the early part of the decade also eroded airlines' business, and the rise of low-cost carriers such as JetBlue Airways Corp. further stymied the big carriers' rebound.
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Eds: Associated Press writer Joshua Freed contributed to this story from Minneapolis.
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It's official: Misery loves company.
September 14, 2005 5:59 PM EDT
ATLANTA - Delta Air Lines Inc., and Northwest Airlines Corp., hobbled by high fuel costs and heavy debt and pension obligations, filed for bankruptcy protection from creditors Wednesday, becoming the third and fourth major carriers to do so since the Sept. 2001 terrorist attacks.
Delta's late afternoon filing included its low-fare carrier Song and was followed shortly after by Northwest's filing.
Delta's total debt is roughly $28.3 billion (euro23 billion), and it listed $21.6 billion (euro17.5 billion) in assets, according to the filing. The asset figure would make Delta's bankruptcy the ninth-largest in U.S. history, according to bankruptcy tracker New Generation Research Inc. The ranking did not change following Delta's recent $425 million (euro345 million) sale of feeder carrier Atlantic Southeast Airlines to SkyWest Inc.
Delta and Northwest said passengers were not expected to see any immediate effects from the filing. Delta also promised to honor all tickets and sent a letter to frequent-flier customers seeking to reassure them. Northwest said it would continue to operate normally its frequent flyer and WorldPerks Visa programs.
"We are operating our full schedule of flights, honoring tickets and reservations as usual, and making normal refunds and exchanges," Gerald Grinstein, chief executive of Delta, said in the letter.
Filing for bankruptcy protection allows Delta to pursue wage cuts for its 65,000-plus full-time employees, as well as pension and health benefits for workers and retirees, that would have been more difficult or impossible without protected status.
While Delta was expected to continue its normal schedule, analysts say some changes to Delta's operations could occur as the company makes its way through bankruptcy court.
Atlanta-based Delta, the nation's third-largest carrier, has lost nearly $10 billion (euro8.1 billion) over the last four years despite announcing it would cut up to 24,000 jobs. In September 2004, it also said it would shed its Dallas hub as part of a sweeping turnaround plan aimed at saving the airline. It has since scaled back its operations in Dallas.
Delta said it is arranging roughly $2 billion (euro1.6 billion) in post-petition financing and already received a commitment for $1.7 billion (euro1.4 billion) in financing.
Northwest, the fourth-largest U.S.airline, had been in better financial shape than some of its competitors, with an extensive Asian network and cargo business both thought to be profitable. But that changed after 9-11, the rise in fuel prices and the epidemic of SARS, a virus that spread through several Asian countries, which cut into a core Northwest business.
Like other airlines, the Eagan, Minnesota-based Northwest has been hit by meteoric increases in jet fuel prices. But Northwest also has the highest labor costs in the industry and has been losing money at the rate of $4 million (euro3.3 million) a day.
"We had developed a plan to restructure Northwest outside of Chapter 11 and have been implementing that plan," Doug Steenland, Northwest president and CEO, said in a statement. "Unfortunately, in addition to an uncompetitive cost structure, our efforts have been overtaken by skyrocketing fuel costs."
Delta and Northwest follow into bankruptcy UAL Corp., the Elk Grove Village, Illinois-based parent of United Airlines, and Arlington, Virginia-based US Airways Group, Inc., which is undergoing reorganization for the second time in three years.
Fort Worth, Texas-based AMR Corp., the parent of American Airlines, the nation's biggest carrier, teetered on the verge of bankruptcy before winning deep concessions from its employees. The other so-called legacy carriers, those with a large presence in multiple regions prior to deregulation in 1978, are Eagan, Minnesota-based Northwest and Houston-based Continental Airlines Inc.
Continental and American are in no immediate danger of bankruptcy. Continental had a big cost advantage over other traditional airlines after it slashed expenses during two bankruptcy reorganizations in the 1990s. American may be the strongest financially of the traditional airlines, thanks to $1.8 billion (euro1.5 billion) in annual labor concessions it won in 2003. Its parent company actually turned a profit in the second quarter.
But even the stronger carriers are finding business harder with fuel prices soaring, carrying crude oil futures past $70 (euro57) a barrel earlier this month.
Some smaller carriers, including Honolulu-based Hawaiian Airlines and Indianapolis-based ATA Airlines Inc., also have filed for bankruptcy in recent years. Hawaiian emerged from bankruptcy in June.
The airline industry was devastated in the aftermath of the 2001 terror attacks, which prompted many people to cut back on air travel. The recession and slow economic recovery in the early part of the decade also eroded airlines' business, and the rise of low-cost carriers such as JetBlue Airways Corp. further stymied the big carriers' rebound.
---
Eds: Associated Press writer Joshua Freed contributed to this story from Minneapolis.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
It's official: Misery loves company.
