From: "Steven L. Robinson" <srobin21 at comcast.net> Subject: Fw: Northwest Airlines Files For Chapter 11 Date: Thu, 15 Sep 2005 22:22:40 -0400
----- Original Message ----- From: <mailto:salazarbiddle at earthlink.net>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.
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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.
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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 at bubbles.com.
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.