Northwest Airlines finds itself at the centre of widespread speculation that it will be forced into bankruptcy reorganisation after chief executive Doug Steenland’s recent warning to a Senate committee.
The airline has if anything encouraged that speculation with Steenland warning that the carrier may join United Airlines and US Airways in Chapter 11 court protection. In an employee newsletter, Steenland said Northwest workers would face steeper pay cuts and more job losses if the airline is forced into bankruptcy.
The speculation increased in June when it became known that Northwest’s board chairman, Gary Wilson, had sold more than 60% of his stock in the company since mid-May. Such insider sales, though perfectly legal, are often a sign of rapidly approaching trouble.
Standard & Poor’s airline credit analyst Phil Baggaley thinks the threat is credible because the airline “now has the highest labour costs of its peer group” after the others lowered their costs, some of them through bankruptcy. The airline has no undrawn bank loans and few unencumbered assets, he points out.
Northwest is in concessions talks with its mechanics and other unions, having reached a pilots deal last year. The machinists, represented by the upstart Aircraft Mechanics Fraternal Association, have said a strike is all but inevitable and have asked federal labour authorities to allow them to begin strike preparations. The National Mediation Board refused and has scheduled sessions for them and other groups too.
Source: Airline Business
