Originally created 09/15/05

Debt sends Northwest to bankruptcy court

MINNEAPOLIS - Northwest Airlines Corp., pummeled by high labor costs and soaring fuel prices, filed for bankruptcy protection Wednesday, entering Chapter 11 on the same day as its larger rival, Delta Air Lines Inc.

The company, which said it had nearly $17.92 billion in debt, said it would continue to fly its normal schedule while reorganizing. Its filing, made in U.S. Bankruptcy Court in the Southern District of New York, also listed $14.35 billion in assets.

Like other airlines, Northwest has been hit by meteoric increases in jet fuel prices. But the fourth-largest airline also has the highest labor costs in the industry and has been losing money at the rate of $4 million a day.

"We had developed a plan to restructure Northwest outside of Chapter 11 and have been implementing that plan," Doug Steenland, Northwest's president and CEO, said in a statement. "Unfortunately, in addition to an uncompetitive cost structure, our efforts have been overtaken by skyrocketing fuel costs."

The company said it expects its fuel bill for 2005 to be $3.3 billion, compared with $2.2 billion for 2004 and $1.6 billion for 2003.

The airline has sought more than $1.1 billion in union concessions for months, warning that bankruptcy was a possibility, but only pilots agreed. Mechanics went on strike in August rather than accept deep layoffs and pay cuts, and though the airline stayed aloft with replacements, it switched to a reduced fall schedule early and saw more delays and cancellations than usual.

Mr. Steenland said the bankruptcy filing was unrelated to the strike.

Northwest also faces $2.5 billion in payments because of its underfunded pensions in the next couple of years, and it has so far unsuccessfully pursued a change to federal law that would allow it to spread the payments over a longer term.

The stock

Northwest Airlines Inc. (NWB)

Wednesday's close: 5.01, 0.06, or 1.21%

Source: www.nyse.com


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