Fw: Northwest Airlines Files For Chapter 11
- From: "Steven L. Robinson" <srobin21@xxxxxxxxxxx>
- Date: Thu, 15 Sep 2005 22:27:26 -0400
----- Original Message -----
From: Jennifer Salazar Biddle
Sent: Wednesday, September 14, 2005 7:19 PM
Subject: Northwest Airlines Files For Chapter 11
AMFA COMMENTS ON NORTHWEST AIRLINES BANKRUPTCY FILING
LACONIA, N. Hampshire, September 14, 2005 ? Aircraft Mechanics Fraternal
Association National Director O.V. Delle-Femine issued the following
statement about Northwest Airlines' filing today for chapter 11 bankruptcy
protection:
"Speaking on behalf of our members who have spent most or all of their
careers working to make Northwest Airlines successful, we are saddened for
our airline company but not surprised that the current management has filed
for bankruptcy protection. We said earlier on that management's refusal to
negotiate with us in good faith, or to agree to binding arbitration, showed
that they intended all along to declare bankruptcy in the hope that a
bankruptcy judge would impose the unreasonable terms Northwest knew it could
never get through the normal negotiating process. But the terms of
Northwest's last offer were harsher than the terms a bankruptcy judge
granted to United Airlines with respect to AMFA. As we also said earlier,
we would rather take our chances with a bankruptcy judge than submit to
management's proposed terms and working conditions that would have been
devastating economically and contrary to AMFA's commitment to quality
maintenance."
AMFA's craft union represents aircraft maintenance technicians and related
support personnel at Alaska Airlines, ATA, Horizon Air, Independence
Airlines, Mesaba Airlines, Northwest Airlines, Southwest Airlines and United
Airlines. AMFA's credo is "Safety in the air begins with quality maintenance
on the ground." To learn more about AMFA, visit www.amfanatl.org.
Northwest Airlines Files For Chapter 11 Reorganization to Facilitate
Restructuring
Wednesday September 14, 5:14 pm ET
http://biz.yahoo.com/prnews/050914/cgw060.html?.v=19
- Normal operations continue
- Skyrocketing fuel costs overtake voluntary restructuring plan
- Goals: competitive costs, efficient business model and strong balance
sheet
- $1.5 billion in cash and investments available for use
EAGAN, Minn., Sept. 14 /PRNewswire-FirstCall/ -- Northwest Airlines
Corporation (Nasdaq: NWAC - News), the world's fourth largest airline,
announced today that it and certain of its subsidiaries have filed voluntary
petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in
the U.S. Bankruptcy Court for the Southern District of New York.
The company emphasized that it will continue operate normally to serve
customers, honor tickets, fly its competitive schedule and continue the
WorldPerks frequent flyer and WorldPerks Visa programs. In addition, its
tour subsidiary, MLT, will also continue normal operations.
"As we have consistently stated, the airline industry has changed
permanently," said Doug Steenland, Northwest president and chief executive
officer. "Northwest must significantly lower its costs to compete with other
carriers. Many of these are legacy carriers that have already used the
bankruptcy process to achieve changes in their cost structures or newer,
low- cost carriers which have much lower labor and operating costs than
legacy carriers."
"We had developed a plan to restructure Northwest outside of Chapter 11 and
have been implementing that plan," Steenland added. "Unfortunately, in
addition to an uncompetitive cost structure, our efforts have been overtaken
by skyrocketing fuel costs. We can no longer continue to incur sizable
losses and reductions in liquidity as we attempt to complete implementation
of the plan. By filing for Chapter 11 now, we ensure that we have the means
to complete the transformation of Northwest quickly and effectively."
Northwest expects that its fuel bill for 2005 will be approximately $3.3
billion. This compares to $2.2 billion for 2004 and $1.6 billion for 2003.
"The Chapter 11 process will allow us to realize three major goals essential
to the transformation of Northwest Airlines: first, a competitive cost
structure including both labor and non-labor costs; second, a more efficient
business model which will allow us to continue to deliver superior choice
and service to our customers; and third, a strengthened balance sheet with
debt and equity levels consistent with long-term profitability."
"We have many valuable assets that position us well in today's marketplace,
including our highly-skilled, dedicated employees, strong hub and spoke
network, domestic and international alliances, world-class airport
facilities, valuable cargo business, strong presence in U.S. Heartland
markets and extensive trans-Pacific and trans-Atlantic international routes.
Once our reorganization has been completed and a competitive cost structure
is in place, Northwest will emerge as a strong competitor with a solid
future."
Steenland said the decision to file for Chapter 11 protection was unrelated
to the ongoing strike by members of the airline's mechanics union. He
stressed that the airline's operations are working well and that the company
has experienced no adverse impact on its operational performance.
In addition to its other labor cost restructuring, Northwest said that it
must continue its transition from defined benefit pension plans to defined
contribution plans. Absent any changes to ERISA, particularly the deficit
reduction contribution provisions, Northwest is required to contribute $3.3
billion to its defined benefit plans from 2006 through 2008. Notwithstanding
having filed its Chapter 11 petition, the airline will continue to seek
favorable pension legislation.
As of September 14, the company's unrestricted cash and short-term
investments balance was $1.5 billion.
Steenland concluded, "Although this filing will change the process of our
restructuring, two things will not change. We will continue to provide safe,
reliable air transportation to the more than 55 million passengers carried
annually to their destinations around the world. And we will continue to
work toward consensual collective bargaining agreements with all of our
employees represented by labor unions."
For further information regarding Northwest's reorganization, visit
Northwest's Web site at http://www.nwa.com .
Delta to file for bankruptcy Wed: source
Wednesday September 14, 3:23 pm ET
By Christian Plumb and Jui Chakravorty
http://biz.yahoo.com/rb/050914/airlines_bankruptcies.html?.v=7
NEW YORK (Reuters) - Delta Air Lines Inc. (NYSE:DAL - News) is expected to
seek bankruptcy protection later on Wednesday, a source familiar with the
situation said, as rival Northwest Airlines Corp. (NasdaqNM:NWAC - News)
considers doing the same.
Delta would become the third major U.S. airline operating under court
protection, dramatizing the industry's struggle with soaring oil and
competition from low-cost carriers.
The sector's woes went from bad to worse this month as refinery outages
caused by Hurricane Katrina sent jet fuel prices spiking. U.S. airlines are
expected to post some $10 billion in losses this year.
Atlanta-based Delta's woes have been compounded by a crushing debt load of
more than $20 billion and one of the industry's biggest underfunded pension
burdens.
Founded in 1928, Delta became a top international player by taking over many
routes from defunct Pan Am in 1991. It has faced an uphill battle to
recovery after getting hammered by the September 11, 2001 terrorist attacks
and the slowdown in flying that followed.
"Delta is overleveraged and they weren't going to stay out of bankruptcy, no
way," said Ray Neidl, an analyst at Calyon Securities.
The airline, which has warned for several months that bankruptcy was a
possibility, declined to comment on the timing of any filing.
Northwest's planned board meeting, disclosed by its pilots union on Tuesday,
will consider whether the airline should file for Chapter 11 or try to
restructure outside of bankruptcy.
LABOR WOES
Northwest's woes are focused on high labor costs, which it is trying to
slash by $1.1 billion.
Analysts said Northwest, which hired replacement workers to substitute for
mechanics and cleaners who struck last month, could be using the threat of a
bankruptcy get concessions what unions have been reluctant to grant at the
bargaining table.
"There's a good chance (of a Northwest filing)," Neidl said, adding: "It
depends on who wins that debate" at today's board meeting.
Both airlines would likely use bankruptcy to slash labor and pension costs,
following in the footsteps of No. 2 U.S. carrier United Airlines, the main
unit of UAL Corp.
(OTC BB:UALAQ.OB - News).
The bankruptcies could put added pressure on other carriers including AMR
Corp. (NYSE:AMR - News), parent of American Airlines, by putting them at a
competitive disadvantage as their bankrupt rivals shed costs and ditch
pensions, analysts said.
On the other hand, other airlines would benefit if Delta and others cut back
on domestic routes, getting rid of overcapacity which has made the U.S.
airline sector the most troubled worldwide.
Credit rating firm Standard & Poor's said on Wednesday that Northwest's
failure to make $42 million in payments due on Tuesday made a bankruptcy
filing likely, adding that it was probable as soon as Wednesday.
Adding to pressure on the Eagan, Minnesota-based carrier, Northwest would
face a lien against its assets if it missed a $65 million pension payment
due on Thursday, S&P said -- unless the airline sought court protection.
United and US Airways Group Inc. (OTC BB:UAIRQ.OB - News) are both already
operating in bankruptcy, though both are hoping to emerge soon -- US Airways
with the help of a group of investors led by America West Holdings Corp.
(NYSE:AWA - News).
Additional bankruptcy filings could pave the way for additional mergers and
acquisitions in the sector, Merrill Lynch & Co. analyst Michael Linenberg
said in a report.
In Wednesday afternoon trade, Northwest shares, which were hammered Tuesday
on expectation of a bankruptcy filing, had recovered 34 cents or 22 percent
to $1.92 each in busy trading on Nasdaq. Delta shares were down 7 cents, or
9 percent, at 71 cents on the New York Stock Exchange.
Northwest's stock has plunged 86 percent so far this year, while Delta has
lost 90 percent of its value.
On the debt markets, Northwest's 10 percent notes due in 2009 rose to 26
cents on the dollar, about 2-1/2 cents higher on the day, after tumbling
more than 9 cents on Tuesday, according to MarketAxess.
Delta's 8.3 percent bonds due 2029 rose to 16 cents on the dollar, about 0.5
cent higher on the day, according to MarketAxess. They are still about
3/4-cent lower month-to-date.
---------------------
>From the Airline Workers News Service, a group of rank and file IAM members
at Northwest Airlines:
Time Is Running Out
The breakdown of negotiations between AMFA and Northwest Airlines on
September 11th has made it clear that the goal of the airline is to destroy
the mechanics union. According to AMFA negotiator, Jeff Mathews, "the issue
is not money but that the company is intent on driving this work group into
the ground; on keeping the heel of its boot on each one of our throats."
Instead of trying to close the gap with the union, NWA advanced demands for
an additional $27 million in concessions, including new language that made
an agreement impossible. AMFA agreed to the Company's target of $203 million
in hard dollars and the elimination of 3181 jobs. However, the airline would
not move on the question of providing a severance package for those who
would lose their jobs. In fact, they moved backward on this item, as well.
Northwest advised AMFA that the new target for concessions for all groups
was $1.4 billion. This represents a $300 million increase. After
subtracting the additional $27 million requested of AMFA, this means that
NWA expects that members of ALPA, PFAA and IAM will give up $273 million
more in concessions. A Northwest source close to negotiations said the
Company will ask the IAM and PFAA to bear the brunt of these additional
cuts. The Company has already asked IAM members to give back a total of
$107 million. IAM District 143 President, Robert DePace has said that the
IAM will do what is necessary to keep NWA out of bankruptcy. This means
that each IAM member would be asked to take wage cuts, benefit cuts and
contract language changes that would total between $6,000 and $7,000 per
year.
Even if $273 million were divided equally among the 3 groups, IAM members,
for example, could be giving up an additional $5,000 to $6,000 per year.
Flight attendants are already being asked to give up $148 million per year.
Ninety million per year would bring their total to $238 million. The scope
of cuts needed to arrive at these figures are hard to imagine. A dollar an
hour pay cut for a baggage handler only produces $2,000 per year in savings
to the Company. Giving back 2 weeks vacation gains NWA only $1,600. These
kinds of cuts can only be attained by including massive job loss in a
contract and a gutting of contract language.
Union members at Northwest are facing their own version of Hurricane
Katrina. Unfortunately, we are all below sea level. Time is running out.
According to Neil Bernstein, a St. Louis expert in labor and employment law,
quoted in the St. Paul Pioneer Press, the destruction of AMFA could
effectively strip other unions at the airline of whatever power remains in a
strike threat.
If union members in the PFAA and IAM do not act soon to aid mechanics,
cleaners and custodians, Northwest will simply dictate terms and destroy
unions, contracts and livelihoods. This is Northwest's business plan. For
the sake of every worker in the United States, this simply cannot be allowed
to happen.
_________________________________________________________________
Airline Workers News Service is maintained by a group of airline industry
workers. Our aim is to seek out and report on information about the state of
our industry and what workers are doing to fight back against some of the
biggest attacks by the airlines in decades. Please share this with your
coworkers. If you know of others who would like to receive these mailings,
please forward their email addresses to awns@xxxxxxxxxxxx
Thank you.
Correction- In our last article we incorrectly said that Change To Win
unions such as the Teamsters and Service Employees International Union would
be announcing support for the AMFA strike this week. We apologize for this
error.
.
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