j-6
09-15-2005, 01:15 AM
http://www.breitbart.com/news/na/D8CKG9383.html
Delta Air Lines Inc. snatched pillows from most of its domestic passengers, and Northwest Airlines Corp. quit offering pretzels. They slashed thousands of jobs and pressed remaining workers to take pay cuts. They renegotiated debt and dropped money-losing flights, but it wasn't enough to keep both airlines out of bankruptcy court.
Ultimately, both were undone by spiking fuel prices after Hurricane Katrina. Their other problems _ heavy debt, mounting pension obligations, labor costs higher than their peers _ were serious enough, but could be addressed later. But not the fuel.
Northwest Chief Executive Doug Steenland said there were times in the days after Katrina that the airline was paying nearly $100 a barrel for jet fuel _ almost double its cost at the beginning of the year.
Delta and Northwest both filed for Chapter 11 bankruptcy protection in New York on Wednesday. Both companies said the timing was a coincidence.
They became the third and fourth major carriers to enter Chapter 11 since the 2001 terrorist attacks. The nation's big airlines have lost more than $30 billion in those four years, and the newest bankruptcy filings focused attention on the magnitude of the plight of the nation's big airlines.
By joining the parents of United Airlines and US Airways in bankruptcy, the four major carriers represent more than 40 percent of all available seat miles in the U.S., according to analysts.
"We are reading the first page in a thriller that will end either in resurrection or the death and burial of an entire industry as we know it today," said William Rochelle, an airline bankruptcy lawyer in New York.
Both carriers expect to shrink.
Delta said it will reduce its fleet size, and CEO Gerald Grinstein said it's likely more job cuts will be needed on top of the 24,000 job cuts the Atlanta-based carrier has announced since 2001.
"There is no painless way out of this," Grinstein told The Associated Press. Grinstein, who took over Delta in January 2004, vowed to stay with the airline through bankruptcy.
Steenland said Eagan, Minn.-based Northwest would have a new round of layoffs before the end of the year and would cut flights. Company officials said the 26-day strike by unionized mechanics was not a factor in the decision to seek bankruptcy court protection.
Delta's late afternoon bankruptcy filing included its low-fare subsidiary Song, feeder carrier Comair and 16 other affiliates.
Delta listed its total debt at $28.3 billion and assets at $21.6 billion. The asset figure makes Delta's bankruptcy the ninth-largest in U.S. history, according to bankruptcy tracker New Generation Research Inc. Northwest listed assets of $14.35 billion and debts of $17.92 billion.
Both said passengers would not see any immediate effects from the filings, and pledged to honor all tickets and maintain their frequent- flier programs.
Chapter 11 protection will allow the airlines to pursue cuts in wages, restructure of debt and alter its pension and health benefits for workers and retirees. Steenland said Northwest would try to avoid dumping its pensions on the federal government, which is what United did with a bankruptcy judge's permission. Delta's plans weren't clear.
Both carriers have been seeking pension law changes that would let them spread out the payments to their under-funded pensions. Northwest owes $2.5 billion to its pensions over the next two years, and Delta faces billions in pension payments over the next three years. Delta said Wednesday it does not plan to make its next planned contribution to its pension.
Delta, the nation's third-largest carrier, has lost nearly $10 billion over the last four years. In September 2004, Delta announced it would shed its Dallas hub as part of a sweeping turnaround plan aimed at saving the airline.
Northwest, the country's fourth-largest 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 it, too, was stunned by the rise in fuel prices and the spread of the SARS virus through several Asian countries, which cut into its business there.
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.
Delta said it is arranging roughly $2 billion in post-petition financing and already received a commitment for $1.7 billion in financing.
Delta and Northwest follow into bankruptcy UAL Corp., the Elk Grove Village, Ill.-based parent of United Airlines, and Arlington, Va.- 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.
Neither American nor the other traditional carrier, Houston-based Continental Airlines Inc., are in immediate danger of bankruptcy. Continental won a big cost advantage over other traditional airlines after it slashed expenses during two bankruptcies in the 1990s. American may be the strongest financially of the older hub-and-spoke airlines thanks to $1.8 billion in annual labor concessions won in Its parent company actually turned a profit in the second quarter.
Since early 2003 Northwest has been seeking labor concessions, with a target that rose to $1.4 billion after Hurricane Katrina. All along it warned that bankruptcy was a possibility, but only pilots agreed to cuts. Mechanics struck on Aug. 20 rather than accept deep layoffs and pay cuts, and though the airline stayed aloft with replacements, it switched to a reduced fall schedule early and saw more delays and cancellations than usual.
By filing for Chapter 11 now, Northwest and Delta beat an Oct. 17 change in bankruptcy laws that will make it harder for companies to cancel their debts and pay bonuses to managers, and will generally force companies to either exit bankruptcy or liquidate faster.
Since Delta first came to the edge of bankruptcy last year, its pilot ranks have thinned as some have retired early. Retiring Delta pilots can elect to receive half their pension benefits in a lump sum and the other half as an annuity later _ a move that could ensure they received at least some payout even if Delta later filed for bankruptcy. It's not clear how the lump sum benefit would be affected in bankruptcy, but bankruptcy judges have great leeway in approving changes to company operations.
Delta Air Lines Inc. snatched pillows from most of its domestic passengers, and Northwest Airlines Corp. quit offering pretzels. They slashed thousands of jobs and pressed remaining workers to take pay cuts. They renegotiated debt and dropped money-losing flights, but it wasn't enough to keep both airlines out of bankruptcy court.
Ultimately, both were undone by spiking fuel prices after Hurricane Katrina. Their other problems _ heavy debt, mounting pension obligations, labor costs higher than their peers _ were serious enough, but could be addressed later. But not the fuel.
Northwest Chief Executive Doug Steenland said there were times in the days after Katrina that the airline was paying nearly $100 a barrel for jet fuel _ almost double its cost at the beginning of the year.
Delta and Northwest both filed for Chapter 11 bankruptcy protection in New York on Wednesday. Both companies said the timing was a coincidence.
They became the third and fourth major carriers to enter Chapter 11 since the 2001 terrorist attacks. The nation's big airlines have lost more than $30 billion in those four years, and the newest bankruptcy filings focused attention on the magnitude of the plight of the nation's big airlines.
By joining the parents of United Airlines and US Airways in bankruptcy, the four major carriers represent more than 40 percent of all available seat miles in the U.S., according to analysts.
"We are reading the first page in a thriller that will end either in resurrection or the death and burial of an entire industry as we know it today," said William Rochelle, an airline bankruptcy lawyer in New York.
Both carriers expect to shrink.
Delta said it will reduce its fleet size, and CEO Gerald Grinstein said it's likely more job cuts will be needed on top of the 24,000 job cuts the Atlanta-based carrier has announced since 2001.
"There is no painless way out of this," Grinstein told The Associated Press. Grinstein, who took over Delta in January 2004, vowed to stay with the airline through bankruptcy.
Steenland said Eagan, Minn.-based Northwest would have a new round of layoffs before the end of the year and would cut flights. Company officials said the 26-day strike by unionized mechanics was not a factor in the decision to seek bankruptcy court protection.
Delta's late afternoon bankruptcy filing included its low-fare subsidiary Song, feeder carrier Comair and 16 other affiliates.
Delta listed its total debt at $28.3 billion and assets at $21.6 billion. The asset figure makes Delta's bankruptcy the ninth-largest in U.S. history, according to bankruptcy tracker New Generation Research Inc. Northwest listed assets of $14.35 billion and debts of $17.92 billion.
Both said passengers would not see any immediate effects from the filings, and pledged to honor all tickets and maintain their frequent- flier programs.
Chapter 11 protection will allow the airlines to pursue cuts in wages, restructure of debt and alter its pension and health benefits for workers and retirees. Steenland said Northwest would try to avoid dumping its pensions on the federal government, which is what United did with a bankruptcy judge's permission. Delta's plans weren't clear.
Both carriers have been seeking pension law changes that would let them spread out the payments to their under-funded pensions. Northwest owes $2.5 billion to its pensions over the next two years, and Delta faces billions in pension payments over the next three years. Delta said Wednesday it does not plan to make its next planned contribution to its pension.
Delta, the nation's third-largest carrier, has lost nearly $10 billion over the last four years. In September 2004, Delta announced it would shed its Dallas hub as part of a sweeping turnaround plan aimed at saving the airline.
Northwest, the country's fourth-largest 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 it, too, was stunned by the rise in fuel prices and the spread of the SARS virus through several Asian countries, which cut into its business there.
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.
Delta said it is arranging roughly $2 billion in post-petition financing and already received a commitment for $1.7 billion in financing.
Delta and Northwest follow into bankruptcy UAL Corp., the Elk Grove Village, Ill.-based parent of United Airlines, and Arlington, Va.- 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.
Neither American nor the other traditional carrier, Houston-based Continental Airlines Inc., are in immediate danger of bankruptcy. Continental won a big cost advantage over other traditional airlines after it slashed expenses during two bankruptcies in the 1990s. American may be the strongest financially of the older hub-and-spoke airlines thanks to $1.8 billion in annual labor concessions won in Its parent company actually turned a profit in the second quarter.
Since early 2003 Northwest has been seeking labor concessions, with a target that rose to $1.4 billion after Hurricane Katrina. All along it warned that bankruptcy was a possibility, but only pilots agreed to cuts. Mechanics struck on Aug. 20 rather than accept deep layoffs and pay cuts, and though the airline stayed aloft with replacements, it switched to a reduced fall schedule early and saw more delays and cancellations than usual.
By filing for Chapter 11 now, Northwest and Delta beat an Oct. 17 change in bankruptcy laws that will make it harder for companies to cancel their debts and pay bonuses to managers, and will generally force companies to either exit bankruptcy or liquidate faster.
Since Delta first came to the edge of bankruptcy last year, its pilot ranks have thinned as some have retired early. Retiring Delta pilots can elect to receive half their pension benefits in a lump sum and the other half as an annuity later _ a move that could ensure they received at least some payout even if Delta later filed for bankruptcy. It's not clear how the lump sum benefit would be affected in bankruptcy, but bankruptcy judges have great leeway in approving changes to company operations.