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REIGNING IN CHAPTER 11
01 October 2005
Four years ago you would have been laughed at had you predicted that four of the seven largest US carriers would be in Chapter 11. But September's filings by Delta and Northwest have surprised no one. Victoria Pennington reports.
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Delta Air Lines
Airlines
Chapter 11
bankruptcy protection
RJ
Many industry insiders had been predicting when, not if, Delta Air Lines would file for bankruptcy. The inevitable happened on September 15 after countless cost-cutting measures were seriously hampered by high fuel prices and intense domestic competition. Northwest Airlines followed suit and filed for Chapter 11 bankruptcy protection on the same day.
Even though the two airlines filed on the same day, the circumstances leading to both filings were very different.
Delta Air Lines was struggling to deal with a crushing debt load of more than $20 billion and one of the industry's biggest underfunded pension burdens. Delta's employee pension plans are underfunded by $10.6 billion.
Even though the airline made stringent cost-cutting measures, the added pressure of soaring fuel prices – made worse by Hurricanes Katrina and Rita – forced Delta into bankruptcy.
"Delta's filing for Chapter 11 was not unexpected," says one banker. "It has been very open in...
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