Delta & Northwest File Chapter 11

Good to see all that money wasted away in Iraq that doesn't get listed on the budget and deficit now while the Gulf coast had the most expensive hurricane in history and gas prices are at an all-time high forcing now the effects of it.

Pretty good run for W in 5 years:

Worst human attack on our shores, worst natural disaster, election supporters Enron and World com debacles, record gas prices and record profits for his oil supporters, GM close to bankruptcy and now two more airlines filing chapter 11's ect,ect,ect.

Delta, Northwest file for Chapter 11 <!-- END HEADLINE -->
<!-- BEGIN STORY BODY -->By Patrick Fitzgibbons 51 minutes ago

Delta Air Lines Inc. (NYSE:DAL - news) and Northwest Airlines (Nasdaq:NWAC - news), the third- and fourth-largest U.S. air carriers, both declared bankruptcy on Wednesday as the industry's struggle with soaring oil prices and low-cost competition came to a head to create its blackest day.

With the filings, both made in U.S. bankruptcy court in the Southern District of New York, four of the seven largest airlines in the United States are now operating under Chapter 11 federal bankruptcy protection from their creditors.

Both airlines would likely use bankruptcy to slash labor and pension costs, following in the footsteps of No. 2 U.S. carrier United Airlines, the main unit of UAL Corp. (OTC BB:UALAQ.OB - news) and No. 7 rival, US Airways (OTC BB:UAIRQ.OB - news).

With respective assets of $21.6 billion and $14.4 billion, Delta and Northwest became the second- and third-largest U.S. airline bankruptcies ever. Delta's is the ninth-largest U.S. bankruptcy ever.

The filings could put added pressure on other carriers including leader AMR Corp. (NYSE:AMR - news), parent of American Airlines, by putting them at a disadvantage as their bankrupt rivals shed costs and ditch pensions, analysts said.

But other airlines could benefit if Delta and others cut back on domestic routes, getting rid of overcapacity that has made the U.S. airline sector the most troubled worldwide.

"The action we have taken is a necessary and responsible step to preserve Delta's value for our creditors, customers, employees, business partners and other stakeholders," said Delta Chief Executive Gerald Grinstein in a release. "Delta is open for business as usual."

The sector's woes went from bad to worse this month as refinery outages caused by Hurricane Katrina sent jet fuel prices spiking. U.S. airlines are expected to post some $10 billion in losses this year.


Atlanta-based Delta's problems were compounded by a crushing debt load of more than $20 billion and one of the industry's biggest underfunded-pension burdens.

Delta has pension plans that are $10.6 billion underfunded, said a spokesman for the U.S. agency that insures pensions.

Should Delta decide to terminate its pension plans, the PBGC would be liable for $8.4 billion of the underfunding, a spokesman for the Pension Benefit Guaranty Corp. (PBGC) said.

Founded in 1928, Delta became a top player by taking over many routes from defunct Pan Am. It has faced an uphill battle after getting hammered by the September 11 attacks, and the slowdown in flying that followed.

"Delta is overleveraged and they weren't going to stay out of bankruptcy, no way," said Ray Neidl, an analyst at Calyon Securities.

Delta owes about $28 billion and Northwest almost $18 billion to bondholders, trade creditors and other lenders, according to court documents, many of whom are facing massive losses.

Delta's filing will likely wipe out its equity investors and leave most unsecured bondholders recovering 15 percent or less of their original investments, strategists said.

Some secured creditors will likely recover most of their investments, but others could lose up to 80 percent.

Walt Disney Co. (NYSE:DIS - news) on Wednesday said it may have to write down $100 million of Delta aircraft leases it holds, possibly hurting 2005 earnings.


Northwest says its chief problem is high labor costs, which it is trying to slash by $1.1 billion.

Analysts said Northwest, which hired replacement workers to substitute for mechanics and cleaners who struck last month, could be using bankruptcy to get concessions that unions have been reluctant to grant at the bargaining table.

For the employees' part, opinions on the company's prospects were mixed.

"We'd rather have it in the hands of a judge with ethics to get us a fair agreement versus the company's unrealistic demands," said striking mechanic Terry LeVasseur.

"Northwest must significantly lower its costs to compete with other carriers," said Doug Steenland, Northwest president and chief executive. "We had developed a plan ... outside of Chapter 11 and have been implementing that plan."

"Unfortunately, in addition to an uncompetitive cost structure, our efforts have been overtaken by skyrocketing fuel costs," he added.

Filing for bankruptcy gives the airlines time to restructure their debts and negotiate with some of their largest creditors.

For Delta, the first in line to be repaid will likely be lenders that provided $1.7 billion of debtor-in-possession (DIP) financing, money that will help Delta keep operating in bankruptcy.

Delta's DIP arrangers include General Electric Co.'s (NYSE:GE - news) GE Commercial Finance and Morgan Stanley (NYSE:MWD - news).

For Northwest's financing needs, Steenland said the company has "sufficient cash to restructure. We elected not to pursue any DIP financing in part because we have used a fair number of assets by selling them or pledging them already to secure financings that helped us manage through the last several years, so we are no longer an asset-rich company."

Northwest expects to shrink capacity by returning planes to lessors, Steenland said in a conference call on Wednesday.

He said the carrier hopes to avoid the kind of wholesale pension plan terminations that happened at rivals, including United Airlines.

On Wednesday, Delta shares closed down 9 percent at 71 cents on the New York Stock Exchange. Northwest shares, which were hammered Tuesday on expectation of a bankruptcy filing, closed up 19.1 percent, to $1.87 on Nasdaq. Northwest's stock has plunged 86 percent so far this year, while Delta has lost 90 percent of its value.

After the announcement, Moody's Investors Service downgraded Northwest's debt to "Caa2," eight levels below investment grade. Fitch Ratings cut Delta's debt to "D" -- its default rating.

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The General

Another Day, Another Dollar
Airliner Co's, natural tragedy, oil, war, bad leadership.

No serious talk of health care, VA, cancer research, SSI etc......

It's gonna get worse before better.