Delta Bankruptcy Looms, Northwest Air May Follow After Default
Sept. 13 (Bloomberg) -- Delta Air Lines Inc., the third- largest U.S. carrier, may file for bankruptcy tomorrow as rising fuel costs and pressure to discount fares reduce its cash, a person familiar with the company said.
Northwest Airlines Corp., the No. 4 U.S. airline, defaulted on a payment to a commuter carrier, Mesaba Aviation, according to a regulatory filing today by Mesaba's parent, MAIR Holdings Inc. Earlier today the New York Times online edition said the carrier may file for bankruptcy as early as tomorrow.
The biggest U.S. airlines have posted losses of $38.2 billion since 2000 amid competition from discount carriers such as Southwest Airlines Co. and soaring costs. A 58 percent rise in jet-fuel prices this year, boosted in part by Hurricane Katrina, made it even harder to match discount fares.
``The company has made no decision regarding a Chapter 11 filing,'' Northwest spokesman Kurt Ebenhoch said in an e-mail. Delta spokesman Anthony Black didn't immediately return a call seeking comment.
Delta has been seeking to avoid bankruptcy for more than a year and averted a filing in October 2004 mainly by winning pay and benefit concessions from pilots that provided $5 billion in savings over as many years. The Atlanta-based airline revived the bankruptcy warning this year amid more losses, higher fuel prices and declining cash reserves.
Northwest, based in St. Paul, Minnesota, didn't make an $18.7 million payment yesterday and has until Sept. 20 to do so before Mesaba ``may exercise available remedies against Northwest,'' MAIR said in the filing today. Mesaba provided a notice of default to Northwest today, MAIR said.
Shares, Bonds Plunge
Delta shares fell 5 cents to 80 cents at 3:54 p.m. in New York Stock Exchange composite trading. The shares are down 89 percent this year. Delta's 8.3 percent notes maturing in 2029 fell 0.25 cent on the dollar to 15.75 cents to yield 52 percent, according to Trace, the bond-price reporting system of NASD.
Northwest shares tumbled $1.82, or 55 percent, to $1.49 in Nasdaq Stock Market composite trading. The company's 8.875 percent note maturing in 2006 plunged 21.5 cents on the dollar to 22.5 cents.
UAL Corp.'s United Airlines and US Airways Group Inc. are already operating under bankruptcy protection. Filings by Delta and Northwest would put four of the seven biggest U.S. airlines in bankruptcy protection.
U.S. carriers have struggled with the price of jet fuel, which has risen 49 percent over the past 12 months. The conflict in Iraq, rising demand and damage to oil rigs from Katrina have helped drive up the price of crude oil, from which jet fuel is refined.
Major U.S. carriers began to post losses in early 2001 as a slowing U.S. economy led business travelers to shop for lower fares on the Internet and patronize discount carriers.
Then, the Sept. 11 terrorist attacks chopped passenger traffic by about 30 percent, leading airlines to cut flights and almost 100,000 jobs to reduce costs. Delta had 69,150 employees at the end of last year, down from about 80,000 at the end of 2000.
To contact the reporter on this story:
Michael Nol at mnol@bloomberg.net
Last Updated: September 13, 2005 16:00 EDT |
