TWO airlines in crisis - Delta and Northwest - took steps yesterday aimed at gaining some breathing room in their attempts to avoid seeking bankruptcy protection.þþDelta Air Lines, considered the sicker of the pair, said it would sell 11 Boeing 767-200 series jets for $190 million. It also said it would reduce flights from its hub in Cincinnati by 26 percent, a move that would eliminate 1,000 jobs.þþNorthwest, meanwhile, said it planned to resume talks today in Washington with the Aircraft Mechanics Fraternal Association, which struck the airline on Aug. 20. The union confirmed the negotiations on its telephone hotline.þþNorthwest, which has been operating with replacement workers, supervisors and contractors, also told the union it was prepared to give permanent jobs to the substitutes starting Tuesday. In that event, striking workers would not be entitled to get their jobs back even if the sides settle their dispute.þþInvestors' reaction to the developments was mixed. Shares of Delta remained unchanged, at $1.12; shares of Northwest fell 22 cents, to $3.37.þþBoth airlines have warned they will have to seek bankruptcy protection if they cannot cut costs drastically - and soon. þþA filing by Delta could come as early as midmonth, many industry executives, finance experts and analysts say. Delta is facing a severe cash crisis, even though it has spent the last year restructuring its operations.þþÿIt looks to me like the initial stage of the Chapter 11 process is beginning, even before they are in court,ÿ said William T. Warlick, an airline industry analyst with Fitch Ratings.þþYesterday, Delta said it had agreed to sell 11 Boeing 767-200 series jets to ABX Air Inc., previously known as Airborne, for $190 million.þþDelta said it would stop flying the planes on Dec. 1. ABX, which purchased another Boeing 767 from Delta earlier this summer, will turn them into cargo planes. þþLike other airlines, Delta has been hit hard by the rapid rise in the price of jet fuel this year, including a 25 percent spike after Hurricane Katrina interrupted production at Louisiana refineries last week. þþDelta has been striving to cut $5 billion in costs through the end of next year. It barely avoided a bankruptcy filing 11 months ago, when its pilots agreed to grant $1 billion in wage and benefit cuts. þþÿUnfortunately, the high cost of fuel - now made worse by catastrophic devastation to the Gulf Coast - continues to outpace and mask our progress,ÿ James M. Whitehurst, Delta's chief operating officer, said in a message to employees yesterday.þþÿBecause of the extreme seriousness of our financial situation, it is critically important that we continue to step up the pace of our transformation,ÿ he continued.þþThe 1,000 job cuts are in addition to Delta's plan to cut 7,000 positions through next year. But a Delta spokeswoman, Chris E. Kelly, said workers in Cincinnati would be allowed to bid for open positions within the airline. þþAlong with the cuts, Delta said it was eliminating some nonstop flights from Cincinnati to various destinations, including Islip on Long Island; Baton Rouge, La.; and Montgomery, Ala.þþDelta said it would shift more flights to its regional carriers: Comair, which is based in Cincinnati, and Atlantic Southeast Airlines. It also said it would add or expand service to 41 international destinations, following a trend among big airlines.þþDelta announced a deal last month to sell Atlantic Southeast to another of its regional carriers, SkyWest, for $425 million. Officials at the airline are scurrying to close the deal, which would provide Delta with cash that could be used for operations under bankruptcy protection. þþLast month, Delta confirmed that it had begun arranging the financing it would need in the event of a bankruptcy filing.þþNorthwest has warned it, too, could seek bankruptcy protection, unless it is quickly able to win at least $1.1 billion in concessions from its labor unions. Its pilots, who have already agreed to $265 million in cuts, said last week that they would open a new round of talks on another $322 million in wage and benefit concessions.þþNorthwest had sought $176 million in cuts from the mechanics' union, whose 4,430 members walked off the job almost three weeks ago. In a letter to the union, the airline said yesterday that its last offer would no longer be on the table.þþLike Delta, Northwest is facing soaring fuel costs. In its letter, sent Tuesday, the airline said it expected to spend $3.3 billion on fuel this year, 50 percent more than in 2005. þþAnd, it said it expected a loss of $350 million to $400 million for the third quarter, in addition to the $771 million lost in the first half of 2005. þþEven so, Mr. Warlick at Fitch said there was still hope. If Northwest can get the labor cuts quickly, ÿthey stand a chance to stay outÿ of bankruptcy protection, he said.þþThere was better news from United Airlines, which has operated under bankruptcy protection since December 2002. It filed a long-awaited plan of reorganization with the United States Bankruptcy Court in Chicago.þþIn the plan, United, a unit of UAL, said that it expected to emerge from court protection by Feb. 1, which would be three years, one month and 22 days after it filed for bankruptcy. The airline said it expected to obtain a $2.5 billion all-debt package to finance its restructuring plan.þþBut there was no guarantee that the plan, which is subject to a vote by United's creditors, would be final by then. For one thing, the plan assumes that oil would average $50 a barrel over the next few years, well below its recent levels. þþUnited originally hoped to reorganize with federally backed loan guarantees, but the Air Transportation Stabilization Board rejected its application for a final time in June 2004, saying it believed that the airline could obtain financing elsewhere.þþUnited's creditors originally filed 40,000 claims totaling $3.6 trillion against the airline, but the figure has been whittled in bankruptcy to about $45 billion þþ
Source: NY Times
