Northwest Bankruptcy

[eroller]

Delta might be joined by Northwest this week in bankruptcy. NW stock is currently at $1.57 a share, down $1.74 today. Pretty amazing. That is a huge hit for one day.

 

Why do I have this feeling that both NW and DL will file, erase much of their debt, become much leaner, then merge. Just a hunch.

 

Ernie

 

===========================================

 

 

 

NWA stock plunges on bankruptcy report

Tuesday September 13, 4:35 pm ET

 

 

Northwest Airlines Corp. stock plummeted Tuesday amid reports that it was preparing a bankruptcy filing, and partner Mair Holdings Inc., which flies regional jets for the carrier under the Mesaba Airlines name, said that Northwest had missed an $18.7 million payment due Monday.

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Shares of the Eagan-based airline were down $1.90, more than 57 percent, to $1.41 in late-day trading, after The New York Times reported that both Northwest and Delta Air Lines Inc. of Atlanta were preparing to seek Chapter 11 bankruptcy protection as soon as Wednesday. Officials at both airlines said that they had not made a decision on a bankruptcy filing.

 

Also Tuesday, Mair Holdings said that it had delivered a letter of default to Northwest for the missed payment, and would seek available remedies if it is not paid by Sept. 20.

 

Officials at Mair and Northwest declined to comment.

 

Mair (Nasdaq:MAIR - News) flies regional jets to smaller markets for Northwest's Airlink unit, using regional jets and planes leased from Northwest. Northwest, which owns about 27 percent of Mair Holdings, has a service agreement with the smaller company that lasts through 2007. In 2004, Northwest paid the company $421 million for services.

 

But Northwest's cash has been squeezed this year due to high fuel prices; earlier this month it disclosed that its cash reserves had dropped from $2.1 billion to $1.7 billion on June 30. It expects to lose between $350 million and $400 million this quarter, though that number could rise depending on the financial impact of Hurricane Katrina.

 

Even so, the company was thought to be in better financial shape than Delta, and a bankruptcy filing was thought to be weeks away, at least.

 

The Times, citing people briefed on the airline's strategy, said that Northwest had been steadily losing cash in recent weeks and decided to file for Chapter 11 more quickly.

 

The company has been engaged in a three-week strike by mechanics, cleaners and custodians; Northwest (Nasdaq:NWAC - News) said it would begin hiring permanent replacements beginning Tuesday. The Aircraft Mechanics Fraternal Association said it will have a news conference late Tuesday afternoon.

 

Published September 13, 2005 by The Business Journal

[eroller]

From "The Street.com"

 

 

Separately, Northwest has defaulted on an $18.7 million payment due to regional partner Mesaba Airlines, according to a regulatory filing Tuesday from Mesaba parent MAIR Holdings (MAIR:Nasdaq - commentary - research - Cramer's Take).

 

The filing says Mesaba delivered a notice of default to Northwest Tuesday saying it may exercise "available remedies" if it doesn't receive payment in a week.

 

Like the rest of the airline industry, both carriers have struggled with ever-higher fuel prices, which hit new highs in the wake of Hurricane Katrina. Delta's efforts to cut costs and streamline operations haven't been enough in the face of increasing fuel costs.

 

Northwest, meanwhile, says it still needs significant concessions from employees to remain competitive. It recently upped its overall labor savings goal to $1.4 billion a year from $1.1 billion, according to its striking mechanics union.

[DanJ]

NW also decided to not pay a $23 million in aircraft financing due Monday, although they have 10 days before it's considered in default.

 

Ernie, if I recall, you either work or worked for Delta. I've read various discussions in the past about mergers involving Delta and Northwest, but there was something about Continental in that mix. Any idea what it is? It sounded like Continental has some authority to veto DL-NW getting together.

[eroller]

. Any idea what it is? It sounded like Continental has some authority to veto DL-NW getting together.

 

 

Yes, there was/is something to that effect. I'm not sure if that veto power is still in place, and I think it was actually NW that had the veto power and not CO??? At one time or another either CO or NW had a financial share in the other airline, but again I think that arrangement no longer exists.

 

My best friend works for NW so I'll have to ask him. If I find out I'll post it here.

 

Ernie

[Hootsie]

Agh, I just booked all five of us for our Hawaii vacation over the holidays. I did buy travel insurance since the tickets are non-refundable but I'm still worried. They cost us $980 EACH. Tell me I can relax.

[chipster]

I just booked FF seats to Phoenix in February. And wondering if I should buy travel insurance for the Delta tix to Mexico I just bought as well.

 

Once they are in bankruptcy, is it even possible to buy travel insurance for their tickets?

[RBob]

w

Once they are in bankruptcy, is it even possible to buy travel insurance for their tickets?

 

Looking at TravelGuard's alert list, they won't issue coverage for interruptions due to "financial default" of bankrupt airlines, and won't issue coverage for interruptions due to "strike action" on NWA, for example, but apparently will cover interruptions for other reasons. At least, that's the way I read it.

 

I'd guess other insurers have similar policies.

[Hootsie]

I bought insurance from Orbitz when I booked my flight to Hawaii last week thru Northwest. It is thru Access America and bankruptcy IS covered (thankfully). I purchased before they filed tho, so maybe it won't be covered for new policy holders. I noticed United isn't listed as a covered airline and they are already in bankrupty.

 

"Financial Default is a complete suspension of operations due to financial circumstances whether or not a bankruptcy petition is filed."

 

 

You are covered for the specified amount of Trip Cancellation/Interruption purchased in the event of a Financial Default of the Covered

Supplier if all of these conditions are met:

1. You purchased a travel insurance Policy with Trip Cancellation and/or Trip Interruption coverage within 14 days of paying your initial trip deposit.

2. The Financial Default occurs more than seven days after the Policy effective date.

3. The Financial Default results in the complete cessation of services of the named supplier.

4. The airline, cruise line or tour operator is listed as a “Covered Supplier” on the enclosed list.

5. You did not purchase your insurance from the defaulting airline, cruise line, tour operator or their affiliates.

Please note that even if your travel supplier is not on the list, you are still covered for everything else as mentioned in your Letter of

Confirmation. All other terms and conditions of your Certificate of Insurance/Policy apply.

 

Airlines

Airtran Airways

Alaska Airlines

America West

American

British Airways

Continental

Delta

Frontier Airlines

Jetblue Airways Corporation

Midwest Express Airlines

MN Airlines d/b/a Sun Country Airlines

Nippon Air

Northwest

Qantas Airlines

Singapore Airlines

Southwest

[Sheffie]

I just received the following in an e-mail:

 

 

 

As you may already have heard in media reports, Northwest Airlines® has voluntarily filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code. The bankruptcy process will enable Northwest to continue its transformation into a new-era carrier in keeping with the permanent changes that have affected the airline industry, such as rising labor costs and a doubling of fuel prices over the past two years.

 

Because we value your business and proven loyalty, I am writing to assure you that there will be no impact on the WorldPerks® program as a result of the filing. Frequent flyer mileage accrual, redemption, and Elite benefits will remain unchanged. Members will continue to earn and redeem miles according to the current WorldPerks program guidelines.

 

The bankruptcy filing will not impact Northwest’s day-to-day business operations. We remain committed to serving customers, honoring tickets, flying a competitive schedule safely and reliably, maintaining our WorldClubs® lounge program, and all other programs and services.

 

All bookings will be honored, and ticketing policies remain unchanged. Our existing marketing relationships with other airlines remain in place.

 

The decision to file for bankruptcy protection is not related to the current strike by members of the Aircraft Mechanics Fraternal Association (AMFA). Our operation continues to run well and we have experienced no adverse impact on our operational performance as a result of the work stoppage.

 

Customers can continue to book travel on Northwest Airlines with confidence. Although bankruptcy is never a first choice option, it does provide the most prudent means for a restructuring that will ensure the transformation of Northwest into a new-era carrier that is able to compete in the near term and well into the future.

 

Thank you for your continued support of Northwest Airlines. For more information about Northwest’s transformation, please visit nwa.com®.

 

We look forward to continuing to earn your business by providing the outstanding service you deserve.

 

Sincerely,

 

 

Doug Steenland

President and CEO

Northwest Airlines, Inc.

[coiran]

I have tickets on NW for October - I purchased insurance (Access America) through MWA when I booked.

 

Ron

[hdawson]

Chipster. I leave in one month for the Mexican interior. I purchased the travel insurance immediately after booking my air. When traveling outside the US by cruise or land, I think travel insurance is a must.

[Juliadlf]

We've received a similar email regarding the strike this morning. We too purchased trip insurance coverage. We will wait and see what happens. We leave in approximately 2 weeks for our cruise on Liberty. If we get stuck in Europe coming back, oh well, I can think of worse places to be ......

And if we miss the ship in Rome, well, we can tour Rome again.

 

 

By the way, I would have thought that NW and SW would merge one day. Primary domestic carrier and an international carrier.

[nspm_1956]

I have 4 tickets with North Western Airlines for March 2006, leaving on the Liberty. My T. A. said the tickets are non-refundable for backruptcy. So far it sounds like there shouldn't be a problem flying on this date. Any insights to this problem would ease my mind. Thanks.

[2Sisterz]

We purchased two roundtrip tickets to San Juan for our December sailing using my DH ff miles through NWA. Our outbound flight has already been dropped ("not flying this route anymore" was the answer I received) but they were quick to reschedule us on a Continental flight and getting us in to San Juan at the same time NWA would have gotten there. Only change was that we stop in Cincinnati to change planes whereas our first flight was non-stop from Detroit to San Juan. As long as we get there in time (we arrive at 2:30 pm for a 10 pm sailing), I'm OK with that. Didn't cost us anything extra for the switch. Our return flight is still through NW as originally scheduled and they just gave us our seat assignments for that flight. So far so good.................

 

My DH was recently on a NWA flight from Detroit to St. Louis that had to turn around half-way through the flight and return to Detroit under an emergency landing because they lost cabin pressure. Talk about scary. That has been his worst happening yet onboard an aircraft (and he flies several times a year non-stop to Japan for business)! I'll try not to think of that as our departure draws near.;)

[chipster]

Chipster. I leave in one month for the Mexican interior. I purchased the travel insurance immediately after booking my air. When traveling outside the US by cruise or land, I think travel insurance is a must.

 

Thanks for the input. We are on Delta (booked the tix two days before they filed) and I am told the insurance would be no good for a bankrupt airline. HOWEVER, your point about being outside the US is a good one. When purchasing, what value do I give to the trip since the air tickets are basically useless (for insurance purposes)? And if within fourteen days (is that right), they waive the preexisting conditions, right?

[tima300]

I am on the Non-Stop from Detroit to San Juan on Oct 16th and it is still scheduled. I just called NWA to make sure everything was still the same and she told me the flight is scheduled and I am confirmed. I asked her to check flights in December and she said that this flight (1616) is still scheduled through December. That is strange that they said that they are no longer flying this route. :confused:

[ArizonaTracie]

I bought my airline tickets through NWA myself and my cruise through my travel agent along with the trip insurance through access air. Will the insurance cover my airline tickets if something happens with NWA or am I out of luck since I didn't get them through my TA?

[greatam]

Thanks for the input. We are on Delta (booked the tix two days before they filed) and I am told the insurance would be no good for a bankrupt airline. HOWEVER, your point about being outside the US is a good one. When purchasing, what value do I give to the trip since the air tickets are basically useless (for insurance purposes)? And if within fourteen days (is that right), they waive the preexisting conditions, right?

 

Your questions are too vague to be answered specifically.

 

You will need to check individual policies to see if Delta is on the default (bankruptcy) list. Most policies probably have Delta included.

 

You will also need to check individual policies to find out the pre existing conditions policy. Some are 14 days, some are 21 days. Some cover for pre-existing conditions within 180 days, some cover for 90 days. They all vary and have different conditions. You really do need to read the fine print.

[greatam]

I bought my airline tickets through NWA myself and my cruise through my travel agent along with the trip insurance through access air. Will the insurance cover my airline tickets if something happens with NWA or am I out of luck since I didn't get them through my TA?

 

First question-what is access air? Is it by chance Access America?

 

Did your travel agent sell you a cruise policy? If so, it will NOT cover anything that is not booked with the cruise line. Your air tickets, hotels pre and post cruise hotels, shore excursions booked independently WILL NOT be covered if your TA sold you a cruise policy.

 

IF you purchased Access America, BEFORE NW bankruptcy filing, you should be covered, UNLESS NW, due to the mechanics strike, was on the no coverage list prior to filing Chapter 11. You will need to either read the fine print in the policy OR ask the TA.

[2Sisterz]

Our outbound flight has already been dropped ("not flying this route anymore" was the answer I received)...Only change was that we stop in Cincinnati to change planes

 

Correction...We stop in Cleveland not Cincinnati as I wrote above--oops!!

 

Tima300, I called NWA to verify what you said about flight 1616 still operating in December and I was told that flight 1616 DOES NOT operate on December 10 (when we are scheduled to leave), but that it resumes flying on Saturdays and Sundays only starting December 15! We missed it by that much. Glad you said something as I would've wanted back on that flight if I could've arranged it!

[Kimmielee]

With the announced layoffs of 1400 employees... how will they continue to operate???:confused:

[cruzinforever]

First question-what is access air? Is it by chance Access America?

 

Did your travel agent sell you a cruise policy? If so, it will NOT cover anything that is not booked with the cruise line. Your air tickets, hotels pre and post cruise hotels, shore excursions booked independently WILL NOT be covered if your TA sold you a cruise policy.

 

IF you purchased Access America, BEFORE NW bankruptcy filing, you should be covered, UNLESS NW, due to the mechanics strike, was on the no coverage list prior to filing Chapter 11. You will need to either read the fine print in the policy OR ask the TA.

 

If you bought your tickets directly from NWA and bought the insurance they offer, which is AccessAmerica, you should have received a confirmation e mail which includes a 9 page PDF file explaining what is and is not covered. I scanned through it briefly and could find no exclusions for bankruptcy, although there is an exclusion for strikes which could be a loophole.,

[DanJ]

With the announced layoffs of 1400 employees... how will they continue to operate???:confused:

 

While any number of people losing their jobs is too many, 1400 out of the tens of thousands NW has isn't a significant number. As they cut back flights, they don't need as many people.