Two More Airlines in Bankruptcy

[z28luvr01]

NEW YORK (Reuters) - Delta Air Lines Inc. (NYSE:DAL - news) and Northwest Airlines Corp.(Nasdaq:NWAC - news) filed for Chapter 11 bankruptcy protection on Wednesday, according to court documents. Delta, the No. 3 U.S. airline, which earlier this year said it did not have enough cash to meet its liquidity needs in 2005, filed for protection in U.S. bankruptcy court in the Southern District of New York. "The action we have taken is a necessary and responsible step to preserve Delta's value for our creditors, customers, employees, business partners and other stakeholders," said Delta Chief Executive Gerald Grinstein in a release. "Delta is open for business as usual and will continue normal operations throughout the reorganization process." Minnesota-based Northwest, whose mechanics have been on strike since August 20, filed for Chapter 11 protection in the U.S. Bankruptcy court in Manhattan. The two filings doubled to four the number of major U.S. airlines 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 were 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, 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. 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. 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 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. 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. On Wednesday, Delta shares closed down 7 cents, or 9 percent, at 71 cents on the New York Stock Exchange. Northwest shares, which were hammered Tuesday on expectation of a bankruptcy filing, closed up 30 cents, or 19.1 percent, to $1.87 in busy trading on Nasdaq. 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. (Additional reporting by Dena Aubin)

[bowtie_dude]

Thank God for unions! :rolleyes:

[Flybrian]

Thank God for unions!  :rolleyes:

[post="14241"]<{POST_SNAPBACK}>[/post]

Unions have little to do with this compared to deregulation, incompetant CEOs, a general degredation and overall cheapening of air service, and the unrealistic public expectation for cut-rate $49 one-way fares.

[sciguy_0504]

Southwest has made a profit since it's 2nd year in business, I believe. Those $49 one-way flights make money somehow.

[z28luvr01]

They get those prices primarily be flying to off-the-beaten-path airports that aren't heavily used. They feel they can move passengers more efficiently by using smaller airports. SWA also cuts out things like in-flight snacks and maybe even movies. They have a homogenized fleet of nothing but 737s, so mechanics, pilots, and flight attendants can be more easily trained. There's supposed to be books on The Southwest Model....I'd really like to check one out one of these days. To compete with companies like Southwest, the major carriers have had to cut back on a lot of things, like making you pay for meals you used to get for free, or making you pay to "borrow" a headset so that you can hear the in-flight movie. Old planes are kept in service longer than they should be. The 757 I flew home from San Diego on was so old the VCR chewed up three in-flight movies. Air travel used to be a glamorous thing...you were treated like royalty while you were on board. Now it's more like riding a flying bus.

[razoredge]

I knew some people would jump right at the chance to blame this on the mechanics Unions :rolleyes:

Gives me hope for my future because I now know I can read an artical and get more from it than a "highly educated and highly skilled" college boy.

Seems fuel, the effects of Sept 11th and the cut throat practices of capitolism have rendered yet another victory

So does the above scenerio mean middle easterners have accomplished their goals.......or at least some of them ?

Man it sucks to be one of the ones that dont get it.

Wonder if some organization in the airline industry could have helped these folks makes things work ? Na....I guess its best that they bid themselves right out of business, better than being organized. Why did they even bother to invent the calculater ? Hell why even bother with math, just go for it, heck Ill work for free, better to do that than having everyone taking care of business, looking out for industry.

:unsure:

[Flybrian]

Exactly, Z. I for one would gladly pay more to get more. Unfortunately, everyone wants to just get on the Flying Greyhound and jet away to Chicago, er, I mean Midway International. Southwest certainly succeeded and you always hear about their story and that of JetBlue. However, ignored are the severe decline in quality of service offered by the major US carriers as well as well as the half dozen budget fare airlines operating out of PIE (St.Pete/Clwtr Intl.) that went bankrupt, eliminated service, or simply up and left in the past year and a half, including ATA, Southeast, and JetsGo. Add the last two to the growing list of low-cost failures like People Express, Air Florida, ValuJet, and Kiwi, all of which shuttered due to financial problems or forced to close down by the FAA due to maintenance issues. I still think most plane riders (loathe to call them 'travellers' anymore) expect too much for what they pay. I've been aboard numerous flights on budget carries and business class on the old guards and have almost laughed in the faces of people bitching about a 15 min delay or lack of fresh food even though they're paying perhaps $120 for a 1,500-mile flight. Like ordering a $.99 hamburger and being surprised it tastes like crap