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Northwes Airlines Roundup

Old 12-24-2005, 11:18 AM
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Arrow Northwes Airlines Roundup

Northwest pilots won't switch flights
Pilots are refusing to budge on Northwest Airlines Corp.'s demand to create a separate airline to handle some of its flying.
Northwest wants a subsidiary that would fly new 76- to 100-seat airplanes piloted by new hires and laid-off Northwest pilots.
But the pilot's union fears that might shift 1,000 to 1,500 pilots jobs to the new company.
"It's a corporate shell game of transferring assets and franchise value to a new company," Mark McClain, chairman of the Northwest pilots union, told the Star Tribune for a story published Friday.
McClain issued a memo to his members that said: "NWA pilots will not accept the NewCo (subsidiary) proposal. There will be no deal on management's current terms."
Northwest repeated that it believes the establishment of the subsidiary is the "right structure" to help it emerge from bankruptcy.
"Northwest cannot simply bring 70-seat regional aircraft into its mainline system because that does not make economic sense - a fact borne out by the fact that no legacy airline operates 70-seat regional jets within their mainline fleets," the airline said.
Northwest pilots have taken pay cuts of 39 percent since late 2004 to help the company respond to its severe financial problems, McClain said. Northwest pilots now earn $60,000 to $160,000 a year.
Northwest is seeking long-term annual pilot savings of $612 million per year.
McClain said, "I told them at the table the other day, 'When is it enough for you guys? Do we all have to sell our homes?'"
Northwest is bargaining with pilots, flight attendants and ground workers in advance of a Jan. 17 trial in bankruptcy court where it will try to persuade a judge to allow it to reject those union contracts. The unions and Northwest have all said they want to try to make deals before then.
Federal DOT to deny SkyTeam exemption
The federal Transportation Department signaled it would deny an antitrust exemption sought by the SkyTeam airline alliance, which includes Northwest Airlines Corp. and Delta Air Lines Inc.
The request was prompted by Northwest's entry into SkyTeam last year after its partner, KLM Royal Dutch Airlines, merged with SkyTeam member Air France. Northwest has antitrust immunity to work closely on routes and pricing with KLM, but not with other SkyTeam members, which also includes Alitalia and Czech Airlines.
The DOT said the airlines' routes overlap so much that little new service was likely to result from an antitrust waiver. It did allow codeshare agreements, which make it easier for passengers to book trips on multiple airlines.
"The carriers failed to demonstrate sufficient public benefits that would result from a grant of antitrust immunity to the new alliance," DOT said.
The DOT will issue a final decision after the public comment period ends next month. Its preliminary decision Thursday follows the Justice Department's August objection to the antitrust exemption.
Northwest was dismayed.
"They do not address any problems with competition," said Northwest Senior Vice President for Government Affairs Andrea Fischer Newman. "They're basically requiring an unspecified demonstration of benefits that they've never required in any other case. We are very confused, we are very disappointed."
She said she believes it is the first time the government has denied an airline's request for antitrust immunity for an alliance.
Transportation spokesman Bill Mosley could find no earlier examples of airline antitrust denials, although he said two that were approved never took effect because the airlines didn't meet the conditions DOT imposed.
Northwest had said it might have to reduce or eliminate trans-Atlantic flights without antitrust immunity. Its hub in Amsterdam is part of its close ties with KLM. Fischer Newman said Thursday that it's too soon to know what the impact will be.
AMR Corp.'s American Airlines had also argued against antitrust immunity.
Banker doubts Northwest profitability
Northwest Airlines Corp., which filed for bankruptcy protection in September and has lost almost $4 billion since 2001, likely won't generate "significant" money until 2009 or 2010 even though it needs to spend billions to upgrade its planes, according to an investment banker hired by the carrier to advise it through its bankruptcy.
John Luth, president and chief executive officer of Seabury Group LLC, made the assessment of the airline's profitability in special declaration that supported the airline's application to reject collective bargaining agreements with employees and a request to modify retiree benefits.
The declaration made by Luth showed up in court documents filed Wednesday with the Bankruptcy Court in New York.
Seabury, a New York-based company, advises bankrupt airlines through their restructurings.
Northwest has said it has been hobbled by rising fuel costs and competition from low-cost carriers as well as wage pressures.
Seabury's Luth said the airline's exit from bankruptcy hinges on obtaining money for the airline during the bankruptcy period and the renewal of the carrier's aging fleet of aircraft. Northwest's 120 DC-9 planes are, on average, almost 35 years old.
"Under its business plan, Northwest will not begin to generate significant liquidity through its operations until 2009 or 2010," Luth noted in his declaration. "Northwest's cash balance is already at unacceptably low levels and is heading lower."
The Seabury Group chief executive said the airline likely will have to borrow money through debtor-in-posession financing.
Luth further noted in his declaration that the carrier is "significantly behind its North American competitors in replacing its mainline fleet due to years of deferral of this large capital expenditure requirement." The Seabury executive estimated that Northwest faces $5 billion to $7 billion of expenses to renew its fleet over the next seven to 10 years.
Shareholders sue Northwest officials
A New York law firm filed a shareholders' lawsuit against four officials of Northwest Airlines Corp. seeking compensation for losses that stock owners sustained when the carrier filed for bankruptcy protection.
The firm, Milberg Weiss, which has filed many similar shareholder suits, alleges in the lawsuit filed in New York that Northwest insiders sold their stock when they had nonpublic information about the airline's bankruptcy plans.
The suit names Northwest Chairman Gary Wilson, chief executive Doug Steenland, former director Al Checchi and former chief financial officer Bernie Han.
The firm said it will seek class-action certification for the lawsuit and that it is searching for potential plaintiffs who bought Northwest stock between April 21 and Sept. 14, the date that Northwest filed for Chapter 11 bankruptcy.
The lawyers said the defendants made misleading statements about the likelihood of bankruptcy despite knowing months in advance that a bankruptcy filing was "imminently anticipated." As early as April, the firm alleged, Northwest's leaders "viewed bankruptcy reorganization as the only way to dump the crushing burden of Northwest's pension obligations" on the Pension Benefit Guaranty Corp.
"That simply is not true," Northwest said in a statement. "Northwest has been a leader in working with Congress to protect its employees' pensions."
Northwest has been lobbying for a measure that gives airlines 20 years to fully fund their defined-benefit pension plans.
The lawsuit notes that Wilson sold $21.3 million worth of stock in the months before the bankruptcy filing and that Checchi sold $8.4 million of Northwest stock in late April.
Terry Fruth, a shareholder litigation attorney from Minneapolis, predicted thesuit would succeed only if there is "a paper trail on this whole question of who knew what and when."
George Singer, a Minneapolis bankruptcy attorney, predicted the defendants would argue that the bankruptcy risk was stated publicly for months, and that they didn't trade on insider information.
Old 12-25-2005, 09:49 PM
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Eric Stratton's Avatar
Joined APC: Nov 2005
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"Northwest cannot simply bring 70-seat regional aircraft into its mainline system because that does not make economic sense - a fact borne out by the fact that no legacy airline operates 70-seat regional jets within their mainline fleets," the airline said.[QUOTE}

Can someone refresh my memory on how much the legacy carriers that operate 70 seaters are making these days?
Eric Stratton is offline  
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