Airlines expected to file Chapter 11 in mid-September
Experts say Northwest, Delta are likely to wait until after Labor Day
10:56 PM CDT on Monday, August 1, 2005
The Washington Post
WASHINGTON – Northwest Airlines Corp. and Delta Air Lines Inc. are likely to file for Chapter 11 bankruptcy protection in mid-September, a month before a new, more restrictive bankruptcy law goes into effect, bankruptcy experts and airline insiders say.
The airlines are expected to delay any action until after the Labor Day weekend to avoid distressing employees during the busy summer travel period.
Northwest and Delta continue to post significant losses while trying to cut costs and adjust to record high fuel costs.
Last week, Northwest reported a second-quarter loss of $225 million, compared with a loss of $182 million for the same quarter in 2004. The carrier is losing about $4 million a day.
In a conference call with reporters last week, Douglas Steenland, Northwest's president and chief executive, refused to speculate if or when the airline would have to file for bankruptcy. But he said a new bankruptcy law taking effect on Oct. 17 would be "one of the factors" in the decision-making process.
Delta's chief executive, Gerald Grinstein, told employees in a memo last week that the airline's efforts to cut about $5 billion were not enough to avoid a possible bankruptcy filing. The memo came after Delta announced a $382 million loss for the second quarter.
"Delta has been very candid about the risk that a number of factors, some of which are beyond our control, will affect our ability to avoid a Chapter 11 filing." said Delta spokeswoman Benet Wilson. "But we're still working to pursue an out-of-court solution, even as we face increased financial pressures."
Under the new law, companies in Chapter 11 are prohibited from paying retention bonuses to executives, except in cases where the executives have proved they have job offers elsewhere.
The law also will force companies to emerge from Chapter 11 protection quicker. Companies will have up to 18 months of a so-called exclusivity period during which they must submit a reorganization plan and are protected from takeover attempts.
Experts say Northwest, Delta are likely to wait until after Labor Day
10:56 PM CDT on Monday, August 1, 2005
The Washington Post
WASHINGTON – Northwest Airlines Corp. and Delta Air Lines Inc. are likely to file for Chapter 11 bankruptcy protection in mid-September, a month before a new, more restrictive bankruptcy law goes into effect, bankruptcy experts and airline insiders say.
The airlines are expected to delay any action until after the Labor Day weekend to avoid distressing employees during the busy summer travel period.
Northwest and Delta continue to post significant losses while trying to cut costs and adjust to record high fuel costs.
Last week, Northwest reported a second-quarter loss of $225 million, compared with a loss of $182 million for the same quarter in 2004. The carrier is losing about $4 million a day.
In a conference call with reporters last week, Douglas Steenland, Northwest's president and chief executive, refused to speculate if or when the airline would have to file for bankruptcy. But he said a new bankruptcy law taking effect on Oct. 17 would be "one of the factors" in the decision-making process.
Delta's chief executive, Gerald Grinstein, told employees in a memo last week that the airline's efforts to cut about $5 billion were not enough to avoid a possible bankruptcy filing. The memo came after Delta announced a $382 million loss for the second quarter.
"Delta has been very candid about the risk that a number of factors, some of which are beyond our control, will affect our ability to avoid a Chapter 11 filing." said Delta spokeswoman Benet Wilson. "But we're still working to pursue an out-of-court solution, even as we face increased financial pressures."
Under the new law, companies in Chapter 11 are prohibited from paying retention bonuses to executives, except in cases where the executives have proved they have job offers elsewhere.
The law also will force companies to emerge from Chapter 11 protection quicker. Companies will have up to 18 months of a so-called exclusivity period during which they must submit a reorganization plan and are protected from takeover attempts.
