Get read for two more hits this week:
Northwest Airlines and Delta Air Lines are both preparing to seek bankruptcy protection as soon as Wednesday, people close to both companies said today.
Northwest and Delta are each finishing the details of their bankruptcy cases, including the financing that they will require to operate under bankruptcy protection, these people said. That could cause delays, but the fundamental work of preparing each bankruptcy case is complete, they said.
A spokesman for Northwest, the nation’s fifth-biggest airline, said today that the company had made no decision on a Chapter 11 filing. Likewise, a spokeswoman for Delta, which is the third-biggest carrier, said no decision had been made.
Both airlines would file for Chapter 11 protection in United States Bankruptcy Court in New York. Their cases would be assigned to different judges, however. If the filings are made on Wednesday, the first hearings would be on Thursday.
Wunderbar.
Demdude
So the first thing they do is dump Employee Pensions, lower health car contributions and they are all equal to the “low cost” airlines.
Correct?
Demdude
‘health care contributions”**
yet another jeff
Well, at least they waited until after 9-11 to change everything.
KC
Who pays for the employee pensions now? I know I read something about some kind of government fund set up to bail out pensioners if their company goes bottom up.
Jimmy Jazz
We do! Wheeeee! Isn’t corporate welfare fun? Quick, look over there, a black guy just stole a TV!
Steve S
Good. Companies which are managed by incomptent boobs should either get out of the way or die.
The sad thing is, we the tax payers will pick up the tab for their failures, while the management team will get a golden parachute, a tax break, and a new job destroying some other company.
srv
The NW pilots offered let the company stop pension contributions if the airline would turn the fund over to another party. But, alas, the company may just toss it to the PBGC Federal fund.
In that case, they may only get a fraction of their pensions.
I happen to know several of them. And they all voted Republican.
Boo hoo!
BadTux
The basic problem with the full-service airliners is that they’re getting their clock cleaned by the discount airlines. The problem is that the discount airlines only serve a few dozen profitable cities. They don’t serve “flyover country”, those huge areas of the country between the major cities. They are, in effect, skimming the cream and leaving the dregs to the full-service airlines, and the full-service airlines can’t make a profit as long as they keep serving the dregs (the smaller cities in “flyover country”).
The “sane” thing to do would be to allow the full-service airlines and their unprofitable routes to go under. Unfortuunately, this would mean the end of airline service for most smaller airports. And those people vote. And those people send Senators and Congressmen to Washington D.C… and those people want their airline service, irregardless of how much tax money it takes to get it.
In the end, what we are ending up with is a small handfull of de-facto nationalized full-service airlines propped up by heavy federal subsidies mostly serving flyover country, and a bunch of discount air carriers that only serve the profitable routes between the big cities. Given that there is no possibility of the full-service airlines ever making a profit again, I’m not sure what to do here. We could turn over the unprofitable routes to the airline equivalent of Amtrak, but that doesn’t fit well with conservative philosophy, which would rather subsidize than take ownership (not to mention that government-owned airlines in other countries have proven to be costly and inefficient… a true conservative looks at what works and what doesn’t in other countries, rather than simply doing something because of some ideological bent). So it appears that because it is politically impossible to discontinue service to flyover country, we’re stuck with subsidizing the “full service” airlines for the foreseeable future…
Welcome to the real world, folks. Which isn’t as neat and cut and dried as we’d like it to be…
– Badtux the Economist Penguin
Mr Furious
I do’t know if you’re right or not, Badtux, but it makes sense to me. Nicely explained.
PMain
I womder if this is just a sidebar result of 9/11? It seems to me that the majority of airlines haven’t really recovered from it. Touristy places like Hawaii seem to just now be getting back to normal – at least according to a friend that works there… sorry no real figures to back it up.
BadTux
Oh, in case you can’t figure out why they don’t just raise their rates on flights to “flyover country” — the most profitable airplane is one that’s full. A 50-passenger puddle jumper has a fixed sunk cost whether it is carrying 50 passengers or 1 passenger. If you raise fares, people start finding other ways to travel, or simply don’t travel, and you end up not being able to fill up the plane.
Thus why there are some routes that simply are not profitable no matter what you do. You cannot fill up the plane at a fare that will pay the cost of the plane + fuel. The airlines use very sophisticated computers to compute in real time what fare will maximize their revenue, but the computers can’t make an unprofitable route into a profitable route, no matter how much they jiggle the fares in real time.
The current situation of ad-hoc one-time infusions of money, over and over, is untenable in the long term, but any other solution I can think of to maintain service to “flyover country” — such as, say, nationalizing the full-service airlines — is even worse. At present time all I can suggest is that if we are going to subsidize flyover country (and I do believe that maintenance of interstate travel is a proper role of government, as did our founding fathers — look at the “post roads” clause in the Constitution — not to mention that it’d be hard for me to get home to my family in Louisiana if I couldn’t catch the puddle jumper from Houston to Lafayette or Alexandria!) we should regularize the situation rather than keep pretending that the unprofitability of those routes is a “temporary” thing. However, politically that isn’t happening with the current administration… thus we’ll continue to close our eyes, and pretend. Sigh. Why is reality so hard for some people to accept?
– Badtux the Economist Penguin
Shygetz
Why would nationalizing the airlines be worse? As it stands now, we have nationalized the risk of loss of capital, while allowing the profit to remain privatized. Seems like a sweet deal for the airline to me. If we have to subsidize it regardless, why doesn’t the taxpayer get the reward as well as assuming the risk?
JWeidner
Well, MSNBC at least, is reporting that both airlines have declared Chapter 11.
JJ
Perhaps it is time that we used the billions in airline bailout money to build a modern train system. How many miles of bullet-train track could we build for say, 10 billion dollars?
Andrew J. Lazarus
I flew Delta yesterday back from an extended business trip (whence no commenting).
They hadn’t cleaned the aft toilets when we boarded the plane, and by the time this trivial error was fixed, we were 1:40 late.
There were 40 pax on the flight, none planning to recommend Delta to others.
martin
I happen to know several of them. And they all voted Republican!