Northwest stock falls after report on possible bankruptcy
CHICAGO (AP) — Shares of Northwest Airlines fell sharply Monday following a published report that the nation's fourth-largest airline is close to bankruptcy.
Northwest shares fell 83 cents, or 13%, to $5.50 in midday trading on the Nasdaq Stock Market. Northwest's stock has lost nearly half its value this year. (Related story: Northwest backs down on $50 fare increase)
The article in Monday's edition of The Wall Street Journal summed up some of the bad news that has been piling up for the Eagan, Minn., airline, which has said it now has the highest costs of any major U.S. carrier.
Gary Wilson, the airline's largest single shareholder, who is also non-executive chairman, recently has been selling stock as the airline prepares for a possible labor strike. (Related story: Northwest chairman sells most of his shares)
According to SEC filings, Wilson has sold 60% of his stake in the airline since mid-May.
Spokesman Kurt Ebenhoch said the company had no comment on the report by The Wall Street Journal or the decline in Northwest's stock price.
The airlines' mechanics, represented by the Aircraft Mechanics Fraternal Organization, haven't been able to reach a cost-cutting accord with Northwest, despite being under mediation with the federal National Mediation Board.
Although they continue to talk, both sides have prepared for a strike.
Northwest is at a big cost disadvantage compared with other airlines like United Airlines, a unit of UAL, and US Airways Group Inc., which have used bankruptcy, or the threat of bankruptcy, to secure major concessions from their labor unions.
Along with others in the airline industry, Northwest faces continuing challenges with low ticket prices and high fuel costs.
Northwest, which reported a net loss of $450 million in the first quarter of 2005, is also suffering from pension underfunding of $3.8 billion. The airline is lobbying Congress to get more time for airlines to fund their pensions, and change traditional pension plans to more affordable 401(k) employee retirement plans.
Given the bankruptcy court's unique ability to cut labor costs, analysts have said that Northwest and other cash-strapped carriers, including Delta Air Lines, and Continental Airlines, may use Chapter 11 as a last resort.
But Northwest Chief Executive Doug Steenland said that bankruptcy "clearly is not the preferred choice and is not our first option," according to the Journal.
Also Monday, Northwest backed down on a $50 each-way fare increase aimed at business travelers after two other carriers failed to match it.
Northwest announced the fare increase on Friday, and United, Continental Airlines and US Airways all matched it. But American Airlines and Delta Air Lines never did, and other airlines began backing down over the weekend. By Sunday night Northwest dropped it.
Northwest also rescinded a $5 to $10 fare increase on tickets that compete with discount carriers, and a two-night stay requirement for some fares.
The fare increases were dropped "because our fares were no longer competitive," Ebenhoch said on Monday.
Northwest's increase was the first effort to push above the $499 cap for one-way tickets Delta instituted in January. Other carriers matched Delta's cap, at least in markets where they compete. Northwest has complained that the cap is arbitrary and hurts the industry.
edited to add URL_________________
[ edited by Libra63 on Jun 13, 2005 12:06 PM ]
posted on June 13, 2005 01:03:33 PM new
Sad, but true. I think lately it's mostly because of the cost of fuel....and there's not much that can be done about that.
But it seems like all the airlines are having huge problems....with the exception of Southwest and JetBlue(?)
Maybe the other airlines ought to look to them as a model of how to survive in a tough market.
But on this particular potential strike....I think they're CRAZY to do so. United workers just accepted an almost 3.9% wage cut. So maybe these people are going to strike.....lose their income during this time...and THINK the union is going to do what for them, get them higher wages? Some just don't learn by what happens to others.....they have to experience it themselves. sad.
"Whenever the nation is under attack, from within or without, liberals side with the enemy. This is their essence." --Ann Coulter
And why the American Voters chose to RE-elect President Bush to four more years. YES!!!
posted on June 13, 2005 03:26:14 PM new
Southwest and JetBlue have made a lot of smart decisions. Because they are not huge ailines they do not have to keep "prestige routes" open which are money losing routes but neccessary to larger airlines. They have also stayed out of expensive airports. DIA is one of the most expensive airports in the nation in terms of gate space and neither services it whereas United has about 50% of the space there. They looked at airlines like Continental and United and what they were doing wrong and built their model on avoiding those pitfalls.
Also, they were able to grow slowly and under the radar while working out the kinks and the initial short routes allowed for flights that were so cheap that you didn't mind dealing with the little things that would go wrong here and there. No one really cared that the SouthWest LA to Vegas flight ran late every so often when it only cost $49. Their fares have gone up since then but so has their dependability. They are also more personable and the flights are more enjoyable even if boarding is a classic cattle call situation
~~~ • ~~~ • ~~~ • ~~~ • ~~~
No, I'm saying -- I'm merely -- I'm saying what I'm saying. I don't know why I'm always having people say, are you trying to say -- you know what you can do if you want to know what I'm saying is listen to what I'm saying. What I'm saying is what I said ...
- Ann Coulter
[ edited by fenix03 on Jun 13, 2005 03:27 PM ]
posted on June 13, 2005 04:11:09 PM new
Well...one area I am aware of where they [SW] saves money is in the wages they pay their pilots. Can't remember which airlines SW was being compared to...but the article said that SW pilots make about 40% less a year than pilots from other airlines do.
While reading about all the airline problems one can see all the different wages different airlines pay their pilots too - that's got to make a difference in their bottom lines.
I've seen them all over the place....from $141,000. a year, all the way up to $275,000. According to just how many pilots each airlines has...that's a substancial savings to SW.
"Whenever the nation is under attack, from within or without, liberals side with the enemy. This is their essence." --Ann Coulter
And why the American Voters chose to RE-elect President Bush to four more years. YES!!!
posted on June 14, 2005 05:30:26 PM new
Dont know if any of you were around or even remember.Back in July 1966 when I got back from Vietnam,I got discharged from the Navy in Treasure Island near San Fransisco.Would you believe at the time they had a Nation-wide airline strike?There were no planes flying at all.I had two choices to get back to New York-bus or train...I opted for the train-5 days and 4 nights on a choo choo.I did enjoy the train and one sight I will never forgot was our second night out,I was sitting in the observation car and it was 11:00pm at night.We were coming down from the rockies into Denver,Co.Since we were higher up,you could see the lights of Denver for 30 miles-it was quite a site.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Baseball season has started,but they have it all wrong.3 strikes and you're out,4 balls you walk.I can tell you right now a man with 4 balls could not possibly walk
[ edited by classicrock000 on Jun 14, 2005 05:45 PM ]
