Bob
09-14-2005, 10:15 AM
Two of the biggest and most troubled U.S. airlines, Northwest and Delta, appear to be set to file for bankruptcy protection, according to people briefed on the airlines' plans. Both airlines have been hit hard by the rise in jet fuel prices this month and by relentless competition in the industry.
A bankruptcy filing by the two carriers would mean that four of the seven major U.S. airlines, also including United and US Airways, would be operating under court protection. Counting several smaller carriers, that would mean half the seats available on flights in the United States being operated by bankrupt airlines, according to an estimate by Standard & Poor's.
A bankruptcy filing would have little immediate impact on either airline's routes and flights, and frequent-flier programs would remain in place. But consumers may eventually see cuts in service to some cities, as the airlines shift their focus to destinations where they can make money.
And if the experience at the other major airlines in bankruptcy is a guide, workers at Northwest and Delta can expect significant job cuts, reductions in wages and benefits and the end of traditional pension plans.
Both companies were completing their bankruptcy plans on Tuesday.
Officials at each airline said a final decision had not been made to seek Chapter 11 protection.
Northwest's board, which would have to approve a bankruptcy filing, was to meet Wednesday to discuss what action to take, its pilots union said in a statement on Tuesday. The union has a representative on Northwest's board. Delta's board last met on Friday.
If the airlines decide to seek bankruptcy protection, both would file in U.S. Bankruptcy Court in New York.
Delta's filing had been anticipated for some time, but Northwest had been expected to wait several more weeks, hoping to win $1.4 billion in cuts from its labor union. But the spike in fuel prices in the wake of Hurricane Katrina moved the company's timetable forward, people with direct knowledge of the company's thinking said on Tuesday.
Bankruptcy filings give companies a chance to restructure their operations and negotiate lower payments.
But bankruptcy would not eliminate the challenge posed by low-fare competitors like Southwest and JetBlue, which carry one-third of the passengers on flights within the United States.
They can charge less for tickets because they operate at much lower costs than their major competitors, employing fewer workers per airplane with much quicker turnaround times at airports. That, in turn, allows them to make more flights per day than big airlines.
The low-fare airlines' growing presence, up from just 6 percent of passengers in 1990, has kept the big airlines from passing along the punishing rise in the price of jet fuel, of which the airlines use 19 billion gallons, or 72 billion liters, a year. Airlines were already paying 50 percent more this year for jet fuel than they did in 2004 before Hurricane Katrina hit. Prices jumped 25 percent more in the days just afterward, although they have since fallen slightly.
Northwest and Delta, like most of their competitors, have no financial protection from the higher fuel prices, meaning they must immediately pay more in cash when prices rise.
The struggle by inefficient airlines and the rise of low-fare carriers are exactly what was envisioned when President Jimmy Carter ordered the deregulation of the industry in 1978, freeing the airlines from government controls on routes and fares, said Alfred Kahn, chairman of the Civil Aeronautics Board at the time.
"This is the continued working out of the restructuring that deregulation promised and made inescapable," Kahn said on Tuesday. He added, "I don't know where it is going to end."
United, which set off the biggest default in the history of the federal pension agency this year when it scrapped its traditional retirement plans, has obtained two deep sets of cuts from its workers under bankruptcy protection, and it cut 25,000 jobs.
US Airways, which had 46,500 workers before the September 2001 attacks, today has just 22,000. Its workers took three sets of cuts in its two bankruptcies.
Northwest has been trying for three years to win cuts from its pilots, flight attendants, baggage handlers and other employees, raising its demand for cuts to $1.4 billion from $900 million in that time. But only its pilots have agreed to cuts, and the airline is in the fourth week of a strike by 4,430 members of its mechanics' union, who walked out on Aug. 20 over the airline's request for $176 million in cuts.
Northwest has kept operating with 1,900 supervisors, contractors and replacement workers. On Tuesday, it began offering permanent jobs to some of the replacement workers.
http://www.iht.com/articles/2005/09/14/business/air.php
A bankruptcy filing by the two carriers would mean that four of the seven major U.S. airlines, also including United and US Airways, would be operating under court protection. Counting several smaller carriers, that would mean half the seats available on flights in the United States being operated by bankrupt airlines, according to an estimate by Standard & Poor's.
A bankruptcy filing would have little immediate impact on either airline's routes and flights, and frequent-flier programs would remain in place. But consumers may eventually see cuts in service to some cities, as the airlines shift their focus to destinations where they can make money.
And if the experience at the other major airlines in bankruptcy is a guide, workers at Northwest and Delta can expect significant job cuts, reductions in wages and benefits and the end of traditional pension plans.
Both companies were completing their bankruptcy plans on Tuesday.
Officials at each airline said a final decision had not been made to seek Chapter 11 protection.
Northwest's board, which would have to approve a bankruptcy filing, was to meet Wednesday to discuss what action to take, its pilots union said in a statement on Tuesday. The union has a representative on Northwest's board. Delta's board last met on Friday.
If the airlines decide to seek bankruptcy protection, both would file in U.S. Bankruptcy Court in New York.
Delta's filing had been anticipated for some time, but Northwest had been expected to wait several more weeks, hoping to win $1.4 billion in cuts from its labor union. But the spike in fuel prices in the wake of Hurricane Katrina moved the company's timetable forward, people with direct knowledge of the company's thinking said on Tuesday.
Bankruptcy filings give companies a chance to restructure their operations and negotiate lower payments.
But bankruptcy would not eliminate the challenge posed by low-fare competitors like Southwest and JetBlue, which carry one-third of the passengers on flights within the United States.
They can charge less for tickets because they operate at much lower costs than their major competitors, employing fewer workers per airplane with much quicker turnaround times at airports. That, in turn, allows them to make more flights per day than big airlines.
The low-fare airlines' growing presence, up from just 6 percent of passengers in 1990, has kept the big airlines from passing along the punishing rise in the price of jet fuel, of which the airlines use 19 billion gallons, or 72 billion liters, a year. Airlines were already paying 50 percent more this year for jet fuel than they did in 2004 before Hurricane Katrina hit. Prices jumped 25 percent more in the days just afterward, although they have since fallen slightly.
Northwest and Delta, like most of their competitors, have no financial protection from the higher fuel prices, meaning they must immediately pay more in cash when prices rise.
The struggle by inefficient airlines and the rise of low-fare carriers are exactly what was envisioned when President Jimmy Carter ordered the deregulation of the industry in 1978, freeing the airlines from government controls on routes and fares, said Alfred Kahn, chairman of the Civil Aeronautics Board at the time.
"This is the continued working out of the restructuring that deregulation promised and made inescapable," Kahn said on Tuesday. He added, "I don't know where it is going to end."
United, which set off the biggest default in the history of the federal pension agency this year when it scrapped its traditional retirement plans, has obtained two deep sets of cuts from its workers under bankruptcy protection, and it cut 25,000 jobs.
US Airways, which had 46,500 workers before the September 2001 attacks, today has just 22,000. Its workers took three sets of cuts in its two bankruptcies.
Northwest has been trying for three years to win cuts from its pilots, flight attendants, baggage handlers and other employees, raising its demand for cuts to $1.4 billion from $900 million in that time. But only its pilots have agreed to cuts, and the airline is in the fourth week of a strike by 4,430 members of its mechanics' union, who walked out on Aug. 20 over the airline's request for $176 million in cuts.
Northwest has kept operating with 1,900 supervisors, contractors and replacement workers. On Tuesday, it began offering permanent jobs to some of the replacement workers.
http://www.iht.com/articles/2005/09/14/business/air.php