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Delta, Northwest File for Bankruptcy |
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September 14, 2005
Delta’s board of directors, in a unanimous decision, directed the company to take this action, saying it had determined that a Chapter 11 reorganization is in the best long-term interest of the company, its employees, customers, creditors, business partners and other stakeholders. Delta said it expects to continue normal business operations today and throughout the reorganization process. Specifically, it expects to continue to:
“Delta is open for business as usual and will continue normal operations throughout the reorganization process. Our customers can be confident that they remain our number one priority and that their travel plans and SkyMiles are secure.” The main impact, in the short term, is likely to be felt by employees and investors. Bankrupt airlines normally wring more concessions from their employee unions, and investors sometimes see the value of their stock holdings fall to zero. The bankruptcies may be seen as another big step in the rapid evolution of the airline industry. The biggest U.S. airlines have posted losses of $38.2 billion since 2000 for two reasons; stiff competition from discount carriers such as Southwest Airlines and Jet Blue and soaring costs. A 58% rise in jet-fuel prices this year, boosted in part by Hurricane Katrina, made it even harder to match discount fares. Delta has been trying to avoid bankruptcy for over a year, barely heading off a Chapter 11 filing last October. It gained some breathing room after extracting steep pay and benefit cuts from its pilots’ union. Northwest is currently trying to renegotiate $1.1 billion in labor savings, sparking a strike by its mechanics union employees. Northwest telegraphed its bankruptcy intentions earlier this week when it missed a scheduled $18.7 million payment to Mesaba Aviation. It has until September 20 to make that payment. Report Your Experience
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