Delta and Northwest to file for bankruptcy today
Delta and Northwest airlines, two of the largest US airlines, could both file for bankruptcy today. Delta shares dropped to 78 cents yesterday, while Northwest’s stock fell more than 53 percent.
Delta Air Lines’ board meets today. People familiar with the situation told The Wall Street Journal and an industry consultant told The Associated Press that Delta Inc., the nation’s third-largest airline, planned a bankruptcy filing late Wednesday, after the markets close. Another informed source told the AP the filing could be pushed to Thursday depending on when Delta secures roughly $2 billion in debtor-in-possession financing it is seeking.
Northwest’s board is also scheduled to meet today to decide on a bankruptcy filing a member on the board to the Associated Press. The New York Times reported yesterday that the No. 4 U.S. carrier may file for bankruptcy protection as soon as Wednesday, citing anonymous sources.
Airline analyst predict under bankruptcy Delta and Northwest will likely reduce their capacity by 15 percent, which is what United Airlines, and US Airways did after filing for bankruptcy.
Delta Air Lines
Delta and its creditors are still discussing fees and other details that could delay the Chapter 11 filing that will enable to money-losing airline to continue operations, said The Wall Street Journal.
Delta has lost nearly $10 billion since January of 2001, partly due to high oil prices and stiff competition.
The airline has struggled for years to avoid bankruptcy court.
Terms of the proposed deal call for Delta to get about $650 million in new financing, the Journal said. Filing Chapter 11 should enable Delta to reorganize and keep on flying.
But the airline will have to hock virtually of its assets, including aircraft, spare parts, its Comair regional feeder unit and AirElite private-jet operation, gates at New York City’s LaGuardia Airport and even its routes to Tokyo and London, according to documents reviewed by the Journal.
Delta’s assets have an estimated value of about $3 billion.
Delta has made various efforts to cut costs including the elimination of 24,000 jobs over the past four years. The airline also plans to get rid of its Dallas hub as another cost-saving move.
A Chapter 11 filing would make delta the third major US carrier to take that route since 9-11, joining United and US Airways. The later has filed twice in the last three years.
A Delta spokesman declined to comment on the various reports of the airline’s latest move.
Northwest Airlines
Northwest reported yesterday that in a move to preserve cash, it did not make $42 million in required debt payments last weekend since it need to make a $65 million pension contribution tomorrow or risk having a claim made against its assets.
Northwest also announced that it had began to hire permanent replacements for its mechanics who have been on strike since Aug. 20, after negotiations for a $1.1 billion annual labor cost savings plan fell apart.
Report by David Wilkening
David
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