Delta & Northwest file for Chapter 11
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Ohhh, to be a pilot in the USA.
http://news.yahoo.com/news?tmpl=stor...her_airlines_1
A Look at Major Carriers Wed Sep 14, 5:53 PM ET
The following is the status of the four major airlines in bankruptcy and two others that for now are safe from it.
Delta Air Lines Inc.:
_The Atlanta-based company filed for Chapter 11 on Wednesday. The nation's No. 3 carrier will spend the next several months or even longer working on a reorganization plan. It will continue to operate during that time.
UAL Corp.:
_The Elk Grove Village, Ill.-based parent of United Airlines, the nation's No. 2 carrier, has said it intends to emerge from bankruptcy Feb. 1 after 38 months in Chapter 11 — more than twice as long as expected. The company, which filed for Chapter 11 in 2002, used the leverage of bankruptcy law to slice $7 billion from its annual costs and dump its pension obligations. It said it expects to return to profitability next year, but that projection is based on much lower oil prices.
US Airways Group Inc.:
_The Arlington, Va.-based parent of US Airways, the nation's No. 6 carrier in terms of revenue and No. 7 in terms of revenue passenger miles, filed for bankruptcy protection in September, its second filing since 2002. It is poised to emerge from bankruptcy late this month or early in October and merge with Tempe, Ariz.-based America West Airlines. On Thursday, a bankruptcy judge will hold hearings to confirm US Airways' plan of reorganization.
Northwest Airlines Corp.:
_The Eagan, Minn.-based airline, the nation's No. 4 carrier, filed for bankruptcy Wednesday, entering Chapter 11 on the same day as its larger rival, Delta Air Lines Inc. The carrier said earlier this month it needs labor cost savings and changes in pension laws, and that it is hurting from high fuel prices. Doug Steenland, the company's chief executive officer, has acknowledged that the bankruptcy law changes that take effect Oct. 17 were a factor in the timing of the filing.
Continental Airlines Inc.:
_The Houston-based carrier had a big cost advantage over other traditional airlines after it slashed expenses during two bankruptcy reorganizations in the 1990s. Recently, the company set a goal of winning $500 million in annual concessions from labor groups. It got $418 million and is still negotiating with flight attendants. The company flipped to a $100 million profit in the second quarter of this year and padded its cash and short-term investments to $2.05 billion.
American Airlines:
_The nation's largest carrier, a unit of Fort Worth, Texas-based AMR Corp., may be the strongest financially of the traditional airlines, thanks to $1.8 billion in annual labor concessions it won in 2003, when it teetered on the brink of bankruptcy. AMR earned $58 million in the second quarter, only its second profitable period since 2000, but it has $3.40 billion in cash and short-term investments.
Copyright © 2005 The Associated Press. All rights reserved. The information contained in the AP News report may not be published, broadcast, rewritten or redistributed without the prior written authority of The Associated Press.
Copyright © 2005 Yahoo! Inc. All rights reserved.
http://news.yahoo.com/news?tmpl=stor...her_airlines_1
A Look at Major Carriers Wed Sep 14, 5:53 PM ET
The following is the status of the four major airlines in bankruptcy and two others that for now are safe from it.
Delta Air Lines Inc.:
_The Atlanta-based company filed for Chapter 11 on Wednesday. The nation's No. 3 carrier will spend the next several months or even longer working on a reorganization plan. It will continue to operate during that time.
UAL Corp.:
_The Elk Grove Village, Ill.-based parent of United Airlines, the nation's No. 2 carrier, has said it intends to emerge from bankruptcy Feb. 1 after 38 months in Chapter 11 — more than twice as long as expected. The company, which filed for Chapter 11 in 2002, used the leverage of bankruptcy law to slice $7 billion from its annual costs and dump its pension obligations. It said it expects to return to profitability next year, but that projection is based on much lower oil prices.
US Airways Group Inc.:
_The Arlington, Va.-based parent of US Airways, the nation's No. 6 carrier in terms of revenue and No. 7 in terms of revenue passenger miles, filed for bankruptcy protection in September, its second filing since 2002. It is poised to emerge from bankruptcy late this month or early in October and merge with Tempe, Ariz.-based America West Airlines. On Thursday, a bankruptcy judge will hold hearings to confirm US Airways' plan of reorganization.
Northwest Airlines Corp.:
_The Eagan, Minn.-based airline, the nation's No. 4 carrier, filed for bankruptcy Wednesday, entering Chapter 11 on the same day as its larger rival, Delta Air Lines Inc. The carrier said earlier this month it needs labor cost savings and changes in pension laws, and that it is hurting from high fuel prices. Doug Steenland, the company's chief executive officer, has acknowledged that the bankruptcy law changes that take effect Oct. 17 were a factor in the timing of the filing.
Continental Airlines Inc.:
_The Houston-based carrier had a big cost advantage over other traditional airlines after it slashed expenses during two bankruptcy reorganizations in the 1990s. Recently, the company set a goal of winning $500 million in annual concessions from labor groups. It got $418 million and is still negotiating with flight attendants. The company flipped to a $100 million profit in the second quarter of this year and padded its cash and short-term investments to $2.05 billion.
American Airlines:
_The nation's largest carrier, a unit of Fort Worth, Texas-based AMR Corp., may be the strongest financially of the traditional airlines, thanks to $1.8 billion in annual labor concessions it won in 2003, when it teetered on the brink of bankruptcy. AMR earned $58 million in the second quarter, only its second profitable period since 2000, but it has $3.40 billion in cash and short-term investments.
Copyright © 2005 The Associated Press. All rights reserved. The information contained in the AP News report may not be published, broadcast, rewritten or redistributed without the prior written authority of The Associated Press.
Copyright © 2005 Yahoo! Inc. All rights reserved.
I have no friends with Delta, and at Yahoo Airline News, an analyst today stated that:
1) The biggest problem at NWA concerns their pension obligations (Congress might give some relief, spreading it over many years).
2) But based on my reading and some dialogue, Northwest's inspirational "leader", Mr. Doug Steenland, stated that labor is the biggest problem. As for leadership, did General Patton tell his troops many times during WW2 that the troops were the problem? Is that leadership?
JetBlue's CEO might earn about $400,000 this year.
Northwest's Steenland, about $4,000,000, based on a business article somewhere (where did those extra 0s come from?).
Leader$hip by Example.
During the 70s and 80s, the Northwest CEO, a "gentleman" named Nyrop, looked forward to provoking NWA unions into a strike-hard to believe, is it not? Well, "his" airline made more money during a strike. Why? There was a reserve money fund which many airlines contribited to. With a serious problem, a company was allowed to pull out heaps of cash from this Mutual Aid Pact. After Nyrop converted Northwest into Cobra Airlines, the other airlines DISSOLVED the M.A.P., because of CEO Nyrop's cynical abuse of this fund, by way of provoking his "staff". Hence the origin of the striking name. This was well-known by pilots who retired years ago.
What happens to the NWA mechanics'/engineers' strike when it goes on during a Chapter 11 filing?
Any labor law tips from Airbubba? How about Huck? Wino, my favorite "Union Goon"?
How is Delta's CEO providing leadership?
At Continental and American, if they file Chapter 11 after Oct 17, do they not have only 18 months to leave bankruptcy, without liquidation, other than hiding in a merger?
Let's hear the responses. Mir ist nichts klar.
1) The biggest problem at NWA concerns their pension obligations (Congress might give some relief, spreading it over many years).
2) But based on my reading and some dialogue, Northwest's inspirational "leader", Mr. Doug Steenland, stated that labor is the biggest problem. As for leadership, did General Patton tell his troops many times during WW2 that the troops were the problem? Is that leadership?
JetBlue's CEO might earn about $400,000 this year.
Northwest's Steenland, about $4,000,000, based on a business article somewhere (where did those extra 0s come from?).
Leader$hip by Example.
During the 70s and 80s, the Northwest CEO, a "gentleman" named Nyrop, looked forward to provoking NWA unions into a strike-hard to believe, is it not? Well, "his" airline made more money during a strike. Why? There was a reserve money fund which many airlines contribited to. With a serious problem, a company was allowed to pull out heaps of cash from this Mutual Aid Pact. After Nyrop converted Northwest into Cobra Airlines, the other airlines DISSOLVED the M.A.P., because of CEO Nyrop's cynical abuse of this fund, by way of provoking his "staff". Hence the origin of the striking name. This was well-known by pilots who retired years ago.
What happens to the NWA mechanics'/engineers' strike when it goes on during a Chapter 11 filing?
Any labor law tips from Airbubba? How about Huck? Wino, my favorite "Union Goon"?
How is Delta's CEO providing leadership?
At Continental and American, if they file Chapter 11 after Oct 17, do they not have only 18 months to leave bankruptcy, without liquidation, other than hiding in a merger?
Let's hear the responses. Mir ist nichts klar.
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PaxBoy, you made me snicker, even though it''s horrendous for the poor employees of NWA and DAL - you're absolutely right, of course.
De-regulation has actually cost the American public-at-large, according to one recent study (can't remember which Prof. wrote it), due to large defaults, lost share value, and picking up the wreckage of mature pension plans....
De-regulation has actually cost the American public-at-large, according to one recent study (can't remember which Prof. wrote it), due to large defaults, lost share value, and picking up the wreckage of mature pension plans....
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There are different ways to enter bankruptcy in the US.
Chapter 11 is to have the company reorgainised under a courts supervision in order to stay in business and at some point exit Chapter 11 and resume business.
The court can grant relief from some or all of the debts (i.e. creditors) during Chapter 11.
Chapter 11 is to have the company reorgainised under a courts supervision in order to stay in business and at some point exit Chapter 11 and resume business.
The court can grant relief from some or all of the debts (i.e. creditors) during Chapter 11.
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So what is the downside of going into Chpater 11, it would seem that you could mismanage a company and run it into the ground without fear of going down the pan and have all your debt wiped out.
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If approved by a court it allows for protection from creditors seizing assets for a specified period of time. That time is used to re-organize the company. Contracts, pension funds, structure, size may all be modified. Usually there is an attempt to obtain interim financing (cash infusion against remaining assets). eg. Delta is seeking USD2 billion from GE Capital. The share price goes to zero and creditors usually get new shares (in what is essentially a new company) in exchange for debt relief. All subject to approval by creditors and the court.
WellI am not an accountant butI have had direct experience of the infamous Ch11
The first thing to remember is that it is NOT Bankruptcy as we know it in UK-its closer to but not the same as adminsitration
It is a 'filing for protection from creditors under Chapter 11 of the US Bankruptcy code'
It is an interim step allowing you to freeze claims against you while you get your house in order-in other words creditors cannot enforce their normal legal rights and youget to hold onto cash that otherwisewas out the door.
While it is mis-used the intent is good but the price is high. For a start the management loses control of the company to a creditors committee who oversee and approve everything-they are usually the nastier sort of bankers -the financial worlds equivalent of an organsied crime 'enforcer'.
While a company is in Ch 11 it must decide which of its contracts it will honour and which it will reject on emergence from bankruptcy so it can walk away from a long term contract thatwas hurting it. The Bankruptcy Court who supervise everything over and above the creditors committee impose timelines for a filing of a plan of reorgansiation which is essentially a new busine s plan for the going forward period.
During this time you try and come to agreement with creditors and decide which contracts you hold will be rejected (you can only reject US law contracts not foreign law ones)
For a big company this process takes time as the plan must be acceptable to the creditors and the court and usually involves slashing costs and staff and agreeing to settle certain debts for x cents on the dollar.
It may seem an easy get out of jail card but it isnt-its long painful and agonising process especially for staff and day today management.
Ch11 has ben used extensively in the US airline and more lately Telecoms industries -if a company has a reasonable business with prospects of making money day today after restructuring you can usually agree a plan with the concerned parties. If not then its Chapetr 7 and that is the end of the road or taxiway in this case
Both these companies have lots of assets aircraft-slots offices etc and can be effectively restructured but expect that process and the time in Ch11 to be around a year or even more
Theres lots more to it but I hope that gives a laymans explanation.Ive no doubt a financial proessional could pick me up on details In a nutshell its a process to preserve and protect assets and cash remaining in a troubled company, to allow it to restructure and save some value for stockholders (it will be bond holders cos the common shares are seldom worth anything) and preserve some, hopefully the majority of jobs
PB
The first thing to remember is that it is NOT Bankruptcy as we know it in UK-its closer to but not the same as adminsitration
It is a 'filing for protection from creditors under Chapter 11 of the US Bankruptcy code'
It is an interim step allowing you to freeze claims against you while you get your house in order-in other words creditors cannot enforce their normal legal rights and youget to hold onto cash that otherwisewas out the door.
While it is mis-used the intent is good but the price is high. For a start the management loses control of the company to a creditors committee who oversee and approve everything-they are usually the nastier sort of bankers -the financial worlds equivalent of an organsied crime 'enforcer'.
While a company is in Ch 11 it must decide which of its contracts it will honour and which it will reject on emergence from bankruptcy so it can walk away from a long term contract thatwas hurting it. The Bankruptcy Court who supervise everything over and above the creditors committee impose timelines for a filing of a plan of reorgansiation which is essentially a new busine s plan for the going forward period.
During this time you try and come to agreement with creditors and decide which contracts you hold will be rejected (you can only reject US law contracts not foreign law ones)
For a big company this process takes time as the plan must be acceptable to the creditors and the court and usually involves slashing costs and staff and agreeing to settle certain debts for x cents on the dollar.
It may seem an easy get out of jail card but it isnt-its long painful and agonising process especially for staff and day today management.
Ch11 has ben used extensively in the US airline and more lately Telecoms industries -if a company has a reasonable business with prospects of making money day today after restructuring you can usually agree a plan with the concerned parties. If not then its Chapetr 7 and that is the end of the road or taxiway in this case
Both these companies have lots of assets aircraft-slots offices etc and can be effectively restructured but expect that process and the time in Ch11 to be around a year or even more
Theres lots more to it but I hope that gives a laymans explanation.Ive no doubt a financial proessional could pick me up on details In a nutshell its a process to preserve and protect assets and cash remaining in a troubled company, to allow it to restructure and save some value for stockholders (it will be bond holders cos the common shares are seldom worth anything) and preserve some, hopefully the majority of jobs
PB
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Thaks for your info guys.
wrt the above, what protection is there for the organisations that have their contracts rejected? Is it not just a carte blanche to reject everything you don't like?
While a company is in Ch 11 it must decide which of its contracts it will honour and which it will reject on emergence from bankruptcy so it can walk away from a long term contract thatwas hurting it
You can only reject 'Executory'contracts-I forget the definition but it covers what most of us would think of as a contract and has to be under US law.
There is little to prevent the rejection of any of these contracts in law but in practice there are issues to be taken into account. If for example you want to reject a contract with someone you want to do more business with in future or thats on very advantageous terms to you its not always wise to reject an existing contract. The replacement contract might be on worse terms- for example NW buys its lubricants from x yz co under a contract witha term of ten years that fixed prices at 2002 levels -sure you can reject it but you still need lubricants and a new contract is going to be much much more expensive.
In otherwords you cannot just reject the debt you reject the whole thing and a lot of time gets spent weighing these issues up.
Of course soem areas-bond holders are betetr ptrotected than others and I think that legal fees are actually rated as the highest priority debt under Ch11 as well- no cynicism there then.
Sadly-being the US- Joe public is guaranteed to be screwed as employee or stockholder and the consequences for employees can be dire. I used Delta a lot in the 1990s when i lived in that aprt of the world and then were always decent folks to fly with and I feel very sorry for many of them. However this dog eat dog stuff thats the way they like it over there so I am told , but as we have seen recently in the States its mentality that means only a city block seperates main street from the thrid world
PB
There is little to prevent the rejection of any of these contracts in law but in practice there are issues to be taken into account. If for example you want to reject a contract with someone you want to do more business with in future or thats on very advantageous terms to you its not always wise to reject an existing contract. The replacement contract might be on worse terms- for example NW buys its lubricants from x yz co under a contract witha term of ten years that fixed prices at 2002 levels -sure you can reject it but you still need lubricants and a new contract is going to be much much more expensive.
In otherwords you cannot just reject the debt you reject the whole thing and a lot of time gets spent weighing these issues up.
Of course soem areas-bond holders are betetr ptrotected than others and I think that legal fees are actually rated as the highest priority debt under Ch11 as well- no cynicism there then.
Sadly-being the US- Joe public is guaranteed to be screwed as employee or stockholder and the consequences for employees can be dire. I used Delta a lot in the 1990s when i lived in that aprt of the world and then were always decent folks to fly with and I feel very sorry for many of them. However this dog eat dog stuff thats the way they like it over there so I am told , but as we have seen recently in the States its mentality that means only a city block seperates main street from the thrid world
PB
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Thank You Jimmy Carter....
But it may be the ONLY thing he did right.
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Delta and Northwest don’t get the antitrust immunity they seek as part of the sky team. If they file for chapter 11, resize and merge, they probably will get it……….IMHO, it is all part of a strategy.
Paxing All Over The World
it is all part of a strategy
Shall we start thinking up the new name? I'm off to Jet Blast.
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Barit 1 - yes, but refer to my previous post.....
The US public will, on average, pick up a far greater tab per capita than they have saved in lower fares. Approx 20 billion just in pension defaults alone, that our kids are going to have to pay for, and about 200,000 redundancies so far and counting. The notion that the LCC's are replacing these jobs is a fallacy - they replace them with packages worth one third or less the career value and no retirement.
One of the main backers of Deregulation at the time in 1978 recently stated that if he had known this would be the full effect he would never have voted for it. The overall economic damage of allowing competition from carriers providing almost slave-labour packages against the legacies (selling tickets below cost), has been too much and unforseen.
The US public will, on average, pick up a far greater tab per capita than they have saved in lower fares. Approx 20 billion just in pension defaults alone, that our kids are going to have to pay for, and about 200,000 redundancies so far and counting. The notion that the LCC's are replacing these jobs is a fallacy - they replace them with packages worth one third or less the career value and no retirement.
One of the main backers of Deregulation at the time in 1978 recently stated that if he had known this would be the full effect he would never have voted for it. The overall economic damage of allowing competition from carriers providing almost slave-labour packages against the legacies (selling tickets below cost), has been too much and unforseen.
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The real impact of the Ch 11 filing for Delta and NWA is yet to be felt. Granting protection from creditors is fine in theory, but with four of the US majors now in this category, there is going to be a COLLOSSAL ripple effect as fuel suppliers, catering contractors, leasing companies etc etc etc suddenly find that the vast majority of their sales are either not going to be paid or only paid x months ahead at so many cents on the dollar........ most suppliers cannot stand such a disruption to cash-flow and will themselves go under or file for Ch 11.
It's simple - there's no such thing as a free lunch.
It's simple - there's no such thing as a free lunch.
Not much mention in this thread about high labour costs, which is, in my experience a massive drag on company solvency if out of kilter with competitors.
Delta and NWA operate the same aircraft types, offer the same fares (it's a competitive market), and suffer the same fuel cost as Southwest, JetBlue, AirTran, etc. but have payroll costs that are massive in comparison. Well-paid and under-employed staff with perks designed in the fifties and sixties create a burden when trying to compete with locos.
As many British workers discovered in the 70s and 80s, a strong union often means a weak company. And weak companies fail.
Delta and NWA operate the same aircraft types, offer the same fares (it's a competitive market), and suffer the same fuel cost as Southwest, JetBlue, AirTran, etc. but have payroll costs that are massive in comparison. Well-paid and under-employed staff with perks designed in the fifties and sixties create a burden when trying to compete with locos.
As many British workers discovered in the 70s and 80s, a strong union often means a weak company. And weak companies fail.
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LGS - that's a very over-simplified statement. Have a look at what a SWA pilot makes on the 737 and compare. It's mostly the pension costs and healthcare that's out of whack, and it's commonly referred to over here as the LCC's "juniority" advantage.
Younger workforce + not bothering with your retirees = cost advantage.
Let the public pick up the tab.
Having said that, there are still those (particularly the very senior) at the legacy carriers who try to do, and expect to do, less than a full day's work for their pay. 'I've earned it' just won't hack it any more.
Younger workforce + not bothering with your retirees = cost advantage.
Let the public pick up the tab.
Having said that, there are still those (particularly the very senior) at the legacy carriers who try to do, and expect to do, less than a full day's work for their pay. 'I've earned it' just won't hack it any more.